How to Build a Budget like a Professional
by Pepe Santos
It is not news minor league players are in a constant life battle on and off the field. While their heart continues to grind on a day-to-day basis with hopes of making the big leagues, their brain continues to cause stress and anxiety knowing they are forced to count each dollar due to low wages earned. I still remember when San Francisco Giants scout, Francisco Mouett, approached me in Hermosillo, Mexico, to offer me the opportunity of playing professional baseball. I said “Absolutely, sign me up. Whatever it takes!” Who wouldn’t, right?
His response was honest, “You need to know it will be a rough ride, pay is low and living conditions are not optimal, but it’s a once in a lifetime experience.” At 16 I did not know the financial risks involved and was only focused on a dream every ball player has growing up, playing pro. My experience playing professionally taught me many life lessons, but really showed me the importance of personal financial planning. I want to share a few tips that helped me have peace of mind during the season knowing I had my basic needs covered, which also allowed me to focus my energy in enjoying what I loved to the most, play ball.
These tips assisted me during my time as a baseball player, but till this day I utilize them in my life as a professional in development finance. They are based on personal lessons learned and financial wisdom gained through good and bad choices I made in my life. I hope these tips help you become conscious of those things in life that you need and those you want.
Know your yearly income
The first key to financial health is knowing your yearly income. This is the pilar that will determine your lifestyle and it is imperative you abide to your financial cap. Most minor leaguers I had the opportunity to meet complete their budget for a season, which on average lasts around five months. Some mentioned they were not worried knowing they would get a part-time job for the fall or felt comfortable thinking they could make good money coaching back home. This is a huge mistake because you cannot guarantee or predict your income from contracts (coaching/part-time) you don’t even have. Stick to what you have in front of you.
I provide you with an example below of the importance of budgeting for a full year to observe the differences in secured monthly income and later I will explain the reasoning. These numbers are an example, but you can adjust according to your weekly/monthly salary.
As you can see in the last two columns, the difference in budgeting for a five-month season or a full year can drastically impact your finances. The difference in monthly budget seen in the last column is normally money spent on wants, not on needs, so budgeting for a 12-month season will help you set a more efficient cap per month. Any extra income you may receive should be accounted for in the 12-month budget to adjust your monthly cap but remember the only fixed amount you know is your contract. The Monthly Budget Cap = Income from Contract/12.
List your fixed expenses
Understanding your fixed expenses at the time will be key for your monthly/yearly budget. If you follow the 12-month recommended budgeting, it will also allow you to slim down or get rid of fixed costs that you might not need.
Control your variable expenditures
Once you know your fixed needs, many of your variable expenses will be decreased consequently. For example, if you get rid of a car you don’t need, savings on gas, maintenance and repair costs will bump up your available income. Furthermore, it is important you pay attention to detail on costs like groceries, personal care, hobbies, and recreation.
Set up a monthly budget cap for these variable expenditures and adhere to it no matter what. When you go grocery shopping, buy the essentials, avoid any foods that are bad for your body, buy generic brands for personal care, find cheap entertaining and recreational opportunities, and avoid dinning out.
Additionally, the most important thing for you is to understand your salary should be spent on your body. Food, exercise, and overall physical and mental wellbeing. You do not need four different pairs of cleats, 12 batting gloves, multiple arm sleeves, three gloves and expensive sunglasses. Focus on buying the essential tools for you to perform and utilize those the team provide you to its fullest. Your Monthly Net Income = Monthly Budget Cap – (Fixed + Variable Expenses).
I am not going to pretend saving as a minor leaguer its easy, but its not impossible. I understand most months you will be on the verge between having 10 extra dollars and broke, but you must take advantage of every opportunity you have to save. Even if you only can afford to save $50 a month, it goes a long way and it’s important to have a cushion for any unexpected events that may arise.
Most players wait to save after fixed and variable expenditures were accounted for, and honestly the majority ends ups spending the remains on unnecessary items. My rule was to consider savings as a fixed cost, normally 5% of my real 12-month salary. If we take the example of the recommended budgeting for a Double-A player, you would be saving $50 per month. I know sometimes you will have to take out some of those savings to pay for other unexpected costs, but if you stick to this rule your savings will drastically increase.
Your Fixed Monthly Savings = Recommended 12 Month Budget Cap * 5%.
Now, it is important to clarify “Fixed Monthly Savings” will be accounted for in your Monthly Net Income, because you will be including it on your fixed expenses. When you have cash remaining (Monthly Net Income) after all costs are accounted for, you should consider the option of adding another 25% cushion to your savings and utilize the remainder 75% for leisure activities.
Your Savings Cushion = Monthly Net Income * 25%. I will utilize the example above for a Double-A player: If the Monthly Net Income of a player ends up being $100, your Savings Cushion will add $25 to your Fixed Monthly Savings (Total Savings $75). Your Total Savings = (Fixed Monthly Savings + Savings Cushion).
If you want to be a pro, you must believe you are a pro, look like a pro, and act like a pro.
Bottom line (no pun intended) the key to financial wisdom revolves around proper financial education and strict budgeting based on personal discipline.
Believe you are a pro – Even though you are a not a big leaguer, you are a professional baseball player. Be proud of who you are, where you are and what you have accomplished. Millions would kill to be in your spot! Do not try to pretend to be someone you are not by spending on unnecessary things that only create a burden on your mental wellness, which leads into physical deterioration and consequently poor performance.
Look like a pro – The most respected men in baseball have one thing in common. A standard uniform. Fans from California to New York admire players for their performance on and off the field. When fans walk into the stadium they don’t care if your cleats are customized, or your glove has the initials of all your family members and your girlfriend for $100 extra bucks. They identify with you because of what the number on your back represents and how you react to protecting those letters across your chest in clutch situations.
Act like a pro – Be humble at all times. Do not try to impress anyone else but yourself. You’re competing against who you were yesterday, a month ago, a year ago. Keep improving and forget about spending money on things you do not need.
If you build financial discipline in times of stress you will allow yourself to focus on your personal and professional development during and after the season. The more savings you have the more you will be able to focus on your body in the off-season, rather than finding a part-time job that will consume a big chunk of your day. Know that ever penny you give away is equal to time of your life invested in it.