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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.

Like many people in the UK, you’ve probably been a football fan from a very young age, playing at the park after school, and five-a-side after work. Perhaps you have finally conceded that your playing days are behind you and you’re now more keen on watching the world’s top players make magic happen on the pitch rather than getting out there yourself. No matter how you choose to enjoy it, there’s no denying that football is a game packed with surprising life lessons.

Teamwork, trust, camaraderie and perseverance are just some of the things the beautiful game brings up within us – lessons we can go on to apply to every element of our lives. Sometimes the lessons are more trivial – geography and flags often become a specialist subject for fans of teams playing in European competition. Yet surprisingly, you can also add a certain level of financial savvy to the life lessons football can offer you, too.

Thanks to the huge amount of money invested and spent through the game, as well as the ever-evolving regulations surrounding transfers and club ownership, you can take a surprising number of ideas from your favourite football club when it comes to better managing your money. Here are a few examples, as part of our wider look at how football and finances are connected.

To kick off – know your budget!

It may seem like it’s often repeated, but that’s because it’s so completely true. Despite temptations and unexpected expenditures, it’s absolutely vital to live within your means.

An unhappy truth about today’s world is that while the cost of living is rising, for the most part, wages that match well with those costs are not. That makes budgeting and managing your finances very important, although admittedly not always fun.

You might think this has no relation to the spending power of the world’s biggest clubs. After all, a glimpse at the headlines is all it takes to see how many millions top-flight club are able to throw around during the transfer window.

Dig a little deeper though, and you’ll find that football teams are as much held accountable for the cash they flash as the average UK household is accountable when incurring bank fees for overspending – although those fees are beginning to be less unfair.

Since 2009, Financial Fair Play, or FFP, rules have been in place to govern how much clubs can spend on transfers, loans of players and the like, together with harsh penalties if they break the rules. The intention of these regulations is to ensure that clubs cannot unreasonably benefit from the financial clout of their owners and are not allowed to overspend beyond their means.

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.

This all ties into our next point….

Stay on the ball and check the small print

The financial world is one in which you have to toe the line, and that’s as true of football clubs as it is households, businesses and even the banks themselves.

However, small print isn’t about just reading the paperwork thoroughly, be that the contract the new star player signs, or the contract you have on your latest financial agreement.

Let’s say you’re financing the purchase of a sofa for your home. It’s £500, but you’ve worked out a handy deal in which you can spread the cost over 10 months and take it home today. But then you read on, and find that doing so means you’re accepting, in the fine print, 5% interest on top of that £50 per month.

That’ll soon add up as the year goes on, and mean a higher final total sum. If you’re paying something off over multiple years, it’s going to cast a similarly long shadow over your finances – in the same way that even Man United suffers in its transfer and signing fees over the long term. In January 2019, the club still owed over £100 million in unpaid transfer fees from spreading the cost of their A-list signings.

The process that clubs use to make a £90 million player signing feasible, from a purely business perspective, is called “amortisation”. Basically, it means breaking down the cost to spread it over several years – but it also means that that same club could be chasing its tail, financially speaking, for years to come too.

It’s odd to think of big football teams chasing the shadow of money technically spent years ago in owed instalments, but countless households across the UK are doing the same even today. So just as teams increasingly need to think twice about how much value a new star striker will add to the team versus the long repayment period they’ll have to settle up the total, you ought to think twice about, say, the immediate benefits of a low-rate credit card versus the years you’ll spend paying it off for a big ticket purchase.

Passions and purse-strings are best kept in check

To say that emotions run high during the course of a match is an understatement, and that’s also true once the match is over. Managers are on a tightrope the second that form takes a downward turn. Hiring, firing and deadline-day deals often are the result of a desperation to ensure that the winning feeling returns.

We all are guilty of impulse purchases from time to time, and that’s as true of football clubs as it is the average UK household. Likewise, decisions made in the heat of the moment have led to many regretted decisions that might not have happened had a cooler head prevailed.

Whether we like it or not, emotions and money are often tied together, both for good and for bad. It’s up to us to take the high road and not let our money become an extension of our emotions, leading to us splashing out on things we can’t afford to keep up with our friends or treating ourselves to shiny new things on a whim.

It’s important to keep a level head and a perspective on the bigger picture – or the rest of the season, in a football club’s case – to really make our money go the furthest.

Of course, we’re only getting started on how football and finances tie into one another. If you’re ready for more, stick with us into extra time as we explore how you can use your football fandom to get your money back on track.

Written by John Ellmore

    Published on 07-08-2018

    Updated on 19-07-2019

John Ellmore co-founded Know Your Money in 2004 and is a company spokesperson for consumer finance issues. John is committed to providing clear, accurate and transparent financial information.

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