For all the life skills we claim that skateboarding teaches us, money management certainly isn’t one of them.
Sure, there are skaters like Heath Kirchart who squirrel away money in mutual funds. But the majority of sponsored skateboarders (both pros and ams) spend much of their skate careers making just enough money to cover basic living expenses, only to find themselves one day forced into getting an ordinary job and figuring out how to no longer live paycheck to paycheck.
Wanting advice for ourselves (and other curious skaters), we asked Ryan Clements, who deals with a lot of pro skaters’ finances through his agency Excel Management, to put together some money management tips. We covered basic budgeting, saving for retirement, investing, and taxes for freelancers (which includes sponsored skateboarders).
Scroll on for down-to-earth advice, or ignore everything here and go straight to making your financial Street Dreams a reality by putting all your money in the Dyrdek Machine.
STICKING TO A BUDGET
There are phone apps to help people keep track of every dollar going in and out of their accounts, but that’s not always a sustainable way to stick to a budget. What’s your simplest budgeting advice?
The main trick is that as you increase your income, don’t increase your lifestyle [spending] equally with it.
When you’re young and in a studio apartment eating ramen noodles, of course as soon as you start making more money you’re going to get yourself a nicer place and start to eat out. But it gets to the point where you don’t need to live up to where you could live. That’s when you really start saving money and acquiring wealth.
What are the most common things you see skateboarders throwing away money at?
The big expense is the automobile. Instead of buying the Toyota, they buy the BMW, or the Audi, or the Jaguar. That’s easy to fix. But what’s hard to fix is that we’re sold this lifestyle our whole lives and then we get money and it’s like, “I gotta have this too.”
The other one that’s harder to grasp is the Starbucks effect. Getting Starbucks every single day costs say, $8, so that’s $240 a month you’re spending on Starbucks when you could’ve gotten a couple of bags of coffee and made coffee at home. You’re talking about $24 vs. $240. That’s ten times more. Eating out for every meal is the same thing. If you plan your day where you eat a big breakfast before you leave your house or you bring a little hip sack everywhere anyways, bring a fucking sandwich.
Why is it important to have some amount of savings?
It’s the difference between having enough money in the bank so you could survive for three months, or truly, if you lost your job or sponsors you won’t have to scramble to make something happen in 90 days. You could sit back and make a plan, and you’re not a slave to the bank system by owing debt and interest payments. You know, payments on your car, payments on your house, payments on your girlfriend’s car.
I always tell people to pay their stuff off. If you own your stuff, you have freedom. If you hate your sponsor and you’re not down with them, or if you hate your boss or your career, when you’re a slave to the banking system and you have to pay money every month to just survive, you don’t have freedom in your life.
So the message is, live below your means and pay your stuff off.
SAVING FOR RETIREMENT IN YOUR 20’s
Retirement is an abstract concept to think about when you’re young and broke. How can someone in their 20’s earning little money start saving for retirement?
Set up a really simple IRA* at your bank and every week or every paycheck, put something in it. It could be $10-20 dollars a week. It’s not the amount, it’s the habit that you’re getting into. Or you can have a separate account that you do not touch. That’s what you’re saving to put down on a house or car.
Once you get a raise and you’re making like $40,000 a year, you can put in more. An IRA maxes out at like $6,500 a year, so now you’re just maxing that out. Then you get to the next level where your job might offer a 401(k)*, and you’re putting that $6,500 from your IRA into a 401(k), and you get another raise – the max for a 401(k) is $18,500 now – boom, you’re maxing that out. You’re just always in that habit of taking a chunk of your money and putting it in an investment or saving for something.
Someday, hopefully, a 401(k) isn’t enough and you’re investing your post-tax money, whether you’re going in on a business with your friends or you’re investing or buying another house, buying life insurance or annuity. I’m big on spending extra money on your house when you have a mortgage payment. If you have a $2,000 a month mortgage payment, but you could afford $2,500 a month, do that so you’re just chipping away at that line.
*Individual Retirement Account: like a generic savings account, but it grows at a higher interest rate (~3% compared to ~0.06%) and the money in it is only to be used after you retire.
*401(k): like an IRA that your employer also adds money to on a regular basis, helping the total amount of money in the account grow bigger, faster.
What do you usually suggest people invest in?
I think investing in property is great, but it’s very long-term. In 10 years you might not make any money, but in 20 or 30 it’s paid off.
I’m 45, and I bought a couple of rental houses when I was 32 with a 15-year mortgage. I have two more years and they’re paid off. When you’re young it’s hard to see the results, but when you’re older you’re like, “Man, I’m really glad I did that.”
If you buy a house when you’re 30 and you have it paid off by the time you’re 60, you could give that house to your kids, you could rent it and collect the income, you can sell it, and at that point and it definitely increased in value.
Let’s say you invest in a $100,000 house. You put 20% down, the mortgage is $900 a month, but you rent it for $1,100. All of these years—granted you’re going to have repairs, things are going to go wrong, you’re going to come out of pocket every once in a while, you’ll have vacancy—someone else paid your mortgage over the years, and that’s what you have to think about.
Not only did your $100,000 house increase to a $150,000 house in 15 years, someone else paid off your mortgage. You only put 20% down and maybe you had to invest $15,000 over the years, so you’re in for $30,000-50,000, but you have this house that’s worth $150,000. You’re up $100,000 and have a paid-off house where you get to keep the majority of the money that comes in every month.
But it takes a long time to get that point. I’m just getting to that point in my life. I look back and say shit I’m glad I did that and I try to tell other to do the same.
Are there any short-term investments you can recommend?
There’s nothing that’s short-term that’s really lucrative. You could catch an upcycle of the real estate market, but you have to time it right and know what you’re doing.
But let’s say you made a bunch of money in one year, like a bunch of bonuses. Tyshawn [Jones] is a good example. Maybe he got a bunch of bonuses at the end of last year and he’s like, “Man, I have nothing to do with this money for a year.” You could negotiate with banks for high yield CDs* and maybe earn 4% or 5% interest on a CD for a year if you negotiate a good deal.
We just did that. We got the purse for the Vans Park Series World Championships, $240,000, but they paid us six months early. I don’t want that sitting in my account, so I hit up this banker like, “I got this $240 grand, I should park it somewhere for six months.” She gave us a great rate so I’ll make a few thousand dollars.
What about buying and selling stocks?
You have to know what you’re doing, that’s like gambling as far as I’m concerned. I wouldn’t recommend that unless you study that and become an expert.
*High yield CD: a CD (certificate of deposit) is where you deposit a chunk of money at your bank and agree that you won’t withdraw any of the money for a pre-determined amount of time (e.g. 6 months, 1 year, 2 years etc.). In return, the bank promises to grow the money at a higher interest rate (~3%) than if you just put that money in your savings account.
Freelancers are usually recommended to save 25-30% of each paycheck for taxes. Is that the same for pro skaters?
Yeah, it’s really similar. And for our clients who have a hard time saving their money, we take 30% of everything that comes in and name the account “Tax Savings Account”. It’s not like they don’t have access to it, but they know if they take that money they’re basically going into the money that’s not theirs.
Once you start falling behind on taxes, your penalties and interest are insane. That’s how people get caught up, and the IRS is not very lenient.
Which expenses can sponsored skaters write off as deductibles on their taxes?
All these guys that have had TFs over the years, like P-Rod, Shane, and all the guys who are a part of Biebel’s Park, any money you’re paying for rent is deductible. Even the skatepark I have in my front yard is deductible because it’s part of my career as a marketing tool. I want to have people over and host people, and it’s legit.
We used to manage Theotis [Beasley], you know that stuff he has in his backyard? I feel like that was one of the best investments he’s made. He’s skating all the time and always putting clips out, and all that stuff is 100% tax deductible.
What about money spent on skate equipment or put toward filming clips? What else can pro skaters deduct?
Any kind of supply like grip tape, tools to put your board together, everything that is skateboarding-related. Like, Jamie Foy is in Taiwan right now. If he breaks a board and goes to a shop and buys a board, that’s tax deductible.
Everything you do skateboard-wise is deductible. Any kind of travel. Let’s say you live in LA but you’re going to Fresno to film a clip and you spend the night. Every meal you buy outside of town when you get a clip, any filmer you say, “I’ll give you $100 to film this clip”. Everything you do on a big level or small level is deductible.
Let’s say you make $100,000 a year and pay us $5,000-6,000 to manage your money. For that $6,000 I will save you $10,000 in taxes because I will find you every single tax deduction possible. So that’s one way we really break it down.
We’re stressed enough in our lives, and pro skaters are under tremendous stress for their next part or a contest or a mortgage. It’s stressful like every other job. But they need to be out in the streets skating, fulfilling their obligations for their sponsors, doing their media stuff, and whatever else they need to be doing. They don’t need to be concerned with their bank statements.