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Using football to understand your finances

The beautiful game can teach us all a thing or two about personal finances. We take you through some of the most important things we can learn about income, debt and finance from the world of football.

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Being a football fan can actually teach you a lot about life. It’s not all formations, half time pies and replica shirts. Following a team in the modern era often means understanding their finances too. How much debt your club has, the transfer fees it pays and the sponsorship revenue it generates are all vital to its success on the pitch. Fans these days spend hours debating the merits of contract negotiations just as much as they do learning the latest terrace chants.

This knowledge isn’t useless, either. There are things you learn as a modern football fan that can stand you in good stead when it comes to looking at your own personal finances. In fact, many fans probably don’t even realise that they’re now well-versed in some in depth financial concepts.

Don’t believe us? Here are four things you might have picked up from the Beautiful Game:

Financial Fair Play

In 2011/12, UEFA introduced Financial Fair Play regulations to help clubs to spend within their means.

While the rules are complicated, they essentially limit the amount of money clubs can spend over and above what they earn. (In the 2016/17 season this was £13million, or £5million if the club owner was not able to cover the losses).

Once you’ve set your targets, you’ll know whether you can afford to dip into the transfer market.

Fans now regularly fret over whether or not their team can keep within the ‘FFP rules’ and clubs have faced penalties for failing to comply.

While your personal finances might be very different to that of a football club, the ‘living within their means’ message here is useful to take on. It’s a bit like sticking to spending the money you have available (including an agreed overdraft, for example) or setting yourself a budgeting target to stick to. Once you’ve set your targets, you’ll know whether you can afford to dip into the transfer market and invest in your own purchases.


How do football clubs afford their multi-million-pound transfer fees? Can they really ‘spend’ £20 million and make their accounts work?

That’s where amortisation comes in. If a club signs a player for £20 million on a four-year contract then this will equate to a spend of £5 million a year for the duration of this deal.

We can do something similar to help understand the cost of big ticket purchases, especially if we need to borrow to do so. If an item costs £10,000, but you borrow to fund that purchase, the ‘true’ cost to your finances is the monthly repayment, the annual cost of these payments (if you’re looking at a 12-month period) or the total cost of the loan plus interest.

Working these three things out allows you to properly account for the purchase and ensure you’re comfortable with the monthly cost and the amount of interest you’ll end up paying – both more useful figures for calculating your finances.

Wages to turnover

Some clubs manage to bring in a lot of revenue, only to see it disappear out of the door through the wages they pay to their star players.

Wages as a proportion of turnover, therefore, are important for football clubs. Everton, for example, spend £105 million on wages, which accounts for a sizeable chunk of their £171 million revenue.

Your household might not have to muster enough cash to pay for a Premier League footballer, but it is important to think about the proportion of your income you are spending on debt. A high household income is only good news if it isn’t accompanied by high debts just in the same way that a football club’s turnover has to be seen in relation to the amount it spends.

Nationwide, for example, suggests that most people aim for a maximum debt ratio of 45%. Once debt reaches half of your income, it becomes a ratio that requires action. Look into your own debt ratio to see how healthy your finances are.

Sponsorship revenue

Football clubs make a lot of money through sponsorship. Whether it’s a company’s name on a shirt, on a stand or on advertising hoardings, this is a rich source of revenue.

In effect, however, this is a great example of football clubs making the most of their resources to earn a little bit extra.

It’s the equivalent of selling your second hand goods or renting out your drive or spare room to make extra cash from the assets you already have. You might not make the £56 million that Manchester United bring in for their shirt sponsorship but you can make the most of your resources to earn your own little bit extra.

Understand more about the finances of your club and your area with our new interactive guide.

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