Early in my career while working for the NBA, I remember asking myself “will I be rich one day?” I was always on a budget, I barely had any savings and I was getting paid close to minimum wage. My first role didn’t come with healthcare benefits, and while I didn’t have student loans I was always checking my bank account to see if I had enough money to pay the bills. With rent, a car loan and other expenses, there were days I couldn’t get out of my financial rut- let alone be rich.
When you have debt, many financial obligations, or when your salary is low, building your net worth can seem impossible. But regardless of the income or the expenses you have, any current or former athlete can build towards financial freedom or a path to wealth. With the right mindset and strategic planning, athletes can set themselves on a path to accumulate wealth over time.
12 Ways to Build Wealth When You’re on a Budget
Establish Clear Financial Goals. When you create any goal, it’s important to start by defining your financial objectives. Whether it’s saving for retirement, buying a home, starting a business, or paying off debt, having specific goals will give your financial journey purpose and direction.
Create a Realistic Budget. Having a well-structured budget is the foundation of wealth-building on a budget. Budgeting your money can help you manage your finances, control your spending, and allocate funds toward your financial goals. Take the time to track your income and expenses, and make sure your budget is realistic and sustainable.
Eliminate High-Interest Debt. If you have high-interest debt, such as credit card balances, focus on paying it off as quickly as possible. High-interest debt can be a significant obstacle to building wealth, so make a plan to reduce and eliminate it.
Prioritize Savings. Even if you’re making barely enough to pay the bills each month, make saving a priority. Start by setting aside a portion of your income into a savings or investment account. Even small, consistent contributions can add up over time, thanks to the power of compound interest.
When I first started working, I made it a habit to save a little bit of each paycheck into my savings account. Some weeks, that meant contributing $20 or $50. But over time, the habit of saving became second nature and I watched my savings account grow.
Reduce Unnecessary Expenses. Take a look at your budget for discretionary expenses. This might mean dining out less, cutting cable TV, or finding more cost-effective alternatives for your hobbies and entertainment. I increased my savings considerably by packing my own lunches and eating meals at home.
Consider Investing. Even on a budget, you can start investing. Consider low-cost investment options like index funds or exchange-traded funds (ETFs). These can provide a diversified portfolio while keeping fees to a minimum.
Build an Emergency Fund. Having an emergency fund is crucial to protecting your finances. When starting out, I tried to save at least three to months’ of living expenses in my savings account. Having cash on hand provided me with a safety net in case of unexpected financial setbacks.
Increase Your Income. In addition to managing your expenses, think about a few ways ways to increase your income. This might mean working side gigs, freelance work, or pursuing career advancements. Any extra income can accelerate your wealth-building journey.
During my first 5+ years of working full time, my main jobs came with long hours, including evening and weekend work. Still, I found ways to work at holiday events, I got paid for mystery shopping, and I took on other gigs to help me bring in extra money.
Educate Yourself. There are many free resources available to help you make informed decisions about money. Books, YouTube, online courses, personal finance blogs and podcasts can help you make sound financial decisions when you’re starting out. Also, it’s important to understand basic finance terms when you’re getting started.
Tell Family & Friends. Sometimes the people you spend the most time with are those that can heavily influence your spending and saving habits. Going to brunch, renting luxury apartments, or going on vacation with your besties comes with a cost. Letting your inner circle know about your goals can help you stay on track. You might find that a few friends and family members won’t agree with your new lifestyle. In other cases, you may get a lot of support and have some in your tribe join you. Being on the same page with those you’re close with can help you hold each other accountable.
Stay Patient and Consistent. Building wealth when you’re on a budget is a long-term process. Things won’t happen overnight, so its so important to stay patient and maintain consistency with your financial habits. I started my wealth building journey over a decade ago. While I still haven’t reached my wealth goal- I am so much better off than I was after graduating from school. There will be ups and downs, but it’s important to stay disciplined and stick with your plan.
Seek Professional Advice. While it’s important to understand all aspects of your financial life, it’s important to talk to a professional who does this full time. Consider consulting a financial advisor or planner to help you navigate more complex financial goals, such as retirement planning or investment strategies.
Building wealth on a budget is entirely achievable with discipline, strategic planning, and a commitment. By setting clear objectives, creating a realistic budget, saving, investing wisely, and remaining patient, you can work towards financial success and secure your future financial well-being. Remember, the journey may be slow, but the rewards are well worth the effort.
Former athletes, especially those who are just getting started: taking the first step makes all the difference. I remember being so discouraged when I started working. I had found a full time/hourly job doing unglamorous tasks, and I barely had enough money to splurge on things each month. Instead of staying upset, I put a plan together to change my financial situation over time. After making a few adjustments (especially when it came to eating out and limit the shopping I did for clothes), I saw a difference in savings within a matter of months.