NIL Series: Investing - Paying Your Future Self | Zach Miller, Sam Acho, Jeff Locke, Riccardo Stewart | NFL Players’ Podcast #18
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It is not a secret that NIL has made it possible for college athletes to make money before they get to the NFL. College collectives are paying hundreds of thousands of dollars up to millions of dollars to 18 to 22-year-olds.
However, how prepared are these players to receive this money and make the best decisions? For the first time, student-athletes are Paying taxes, opening bank accounts, establishing credit, making significant purchases, etc.
In this episode, we discuss the importance of investing early and wisely.
For questions, you can reach out to Riccardo Stewart at +1 (602) 989-5022.
+ Read the Transcript
Riccardo Stewart (00:11): Hey, want to welcome you guys back to another episode of the AWM NFL podcast. As usual, my name is Riccardo Stewart. I'm your host and I'm joined with my friends and coworkers. We got Sam Acho, Jeff Locke and the man himself, Zach Miller.
And so if you've listened to the two previous episodes, we have this NIL series as well. We title it and primarily it's for parents. It's for players, coaches, people that are, that are in that NIL space. And not so much about how do I get NIL deals, but what do I do when I have money that's coming in? What do I do in terms of taxes? What do I do in terms of finding the appropriate bank? What do I do in terms of building credit? Okay, we've talked about those two things for the previous episodes. And also, how do I choose an advisor and who are the best out there and what should I look for? Today, we want to talk about taxes. And then if we get some time, we're going to talk a little bit about ⁓ investing. And so before we do that, I...
I just want to start with something because something I noticed within the younger generation, I mean, I'm now the old head. I'm not used to being the oldest around, but on this screen, I'm the oldest. And so what's back in right now is in the nineties, the nineties fashion style. I mean, the baggy, baggy jeans are back in. And so just something to kick off for a little fun. What is one nineties song that pops in your head that you still sing - that when it comes on, you still bob to today. And so I'm gonna start first with you, Jeff. Let us know, what is Jeff listening to in terms of 90s?
Jeff Locke (01:41): The last person to ask this question to because I was I did not grow up in music, which is like really hard to even say. I feel like such a weirdo, like not really going to music, but like wasn't big in my family. But like my older brother was a little bit into kind of like the grunge scene back in that day. So like Nirvana was actually who I listened to back then. Don't ask me what I used to wear. We're not going to talk about that in the podcast.
Riccardo Stewart (02:06): Man, yeah, I mean Nirvana, I mean I could name a song from Nirvana, but I know the name, I know the name. Sam, what we have, and if you give me some, some, some, are we, are
Sam Acho (02:16): No, no, let me answer. Let me let me answer the question. Let me because I you know, so so by so I don't know if this is 90s Maybe it's orgy. There should be 90s, but you asked that question immediately came to my mind was party in the city when the heat is gone on I don't know but the Will Smith the end then he thought I'm the army Welcome to Miami. I don't know if that's 90s or early 2000, but that's the meat. He said 90s I said, yeah, give me some some damn any though. I'm me.
Riccardo Stewart (02:43): That's a fun song. I like that. Even ⁓ if you don't like it, you're not upset. You're like, hey, you know what I mean? Let's go. All right, Zach - my gosh, am I curious. What we got?
Zach Miller (02:54): So I was putting together a playlist for my flag football team. My boys are nine tens. So I was putting all the good rap bangers on there. And so gangsters paradise deserves a spot on there. Rest in peace, Coolio. But there's a lot of good stuff from that 90s thousands that I listened to before football games. Got a lot of 50 cent on there, Eminem on there. Like, and my boys, we get after it to that music. I'm stealing from Pete Carroll. Pete Carroll was always listening to music during practice, so I just copy him.
Riccardo Stewart (03:25): I remember, shout out to George Wynn, who was me and Zach's DFO and also Sam's DFO at the University of Texas. George brought out music for the first time that I remember being at a practice and there was music and he was playing some Snoop Dogg, which I absolutely, and it was the snoo.
Yeah, love it. My 90s song, and everybody knows it because it's so famous and I think it's a segue what we're talking about, is going to be Notorious B .I .G. Mo Money, More Problems because the reality of it is, it is Mo Money, More Problems and we'll talk about it later. It's also more money means more complexity. But the problems we're talking about are like this. ⁓ I heard, I heard, ⁓ I can't remember who it was, it wasn't unique to me. Someone say, some things are not problems to be solved, but they're solutions to be managed.
And the problem that comes once you start receiving money and you're a college student or anybody, you got to start paying taxes. And that in itself is you're not going to solve that problem, but it's a solution that needs to be managed. It's something, okay, how do I manage these particular taxes? And so I'm going to start first with Jeff. And Jeff, when it comes to just taxes, and I'm an NIO student athlete and I'm receiving money, is there a limit to how much I have to make in order for me to have to file taxes? And if so, what is it?
Jeff Locke (04:41): That's a great question and ⁓ unfortunately the internet is rife with the wrong answer. So don't just go Google this because it's not going to be right. So what happens is anytime you make over $600 from a single source. So maybe you make over $600 from your collective, that collective or company is supposed to send you what's called a 1099. This is the receipt essentially you get for that you made that money. The problem.
Not the problem, but this is what it is. The IRS also gets a copy of that receipt when that 1099 gets sent. So then the IRS is going to be looking for that tax return that you need to file to go along with that 1099 that they got, or they're going to send you a nasty little letter saying, hey, we got this receipt, but we didn't get you telling us about the receipt later on.
Riccardo Stewart (05:34): Okay, let's flesh that out a little bit more, Jeff. So that's what I have to file. When do I actually have to pay?
Jeff Locke (05:43): Yeah, which these two get mixed up all the time. ⁓ So federally we're talking, in the IRS money, there's this thing called the standard deduction. We're not going to get into the details on it today, but really in 2024, if you make less than $14 ,000, you might not actually owe any taxes to the IRS, but every single state has a different threshold on when you might owe them taxes.
So California is around $5,000. So you could be in a spot where maybe you make, say you go to USC and you make $7,000 total that year. You have to file taxes. You won't owe federal government anything, but you are going to owe California a little bit because you're above their limit. So every situation might be different on what you're going to actually owe depending on where you're getting your income and where you're living most of that year when you get that income.
Riccardo Stewart (06:43): Okay, I'm gonna pause on that. We're gonna come, we're, we're - yeah, but I'm gonna pause on that for a second and just kind of like let's get in the mind of the student athlete as best as we can. Sam, we usually tell our NFL athletes, you gotta just assume that 40 % of what you make, because they're making a lot of money, although some of these NIL guys are making a lot of money as well, that puts them in the highest tax bracket. So we say just assume that that money that comes in, that gross income, the amount you see, that 40% of it is gone.
Riccardo Stewart (07:09): Now we say that, but Sim, how hard is that to really look at all this money and to think, okay, 40% of this is not here?
Sam Acho (07:16): Well, it's extremely difficult whether you're a collegiate athlete or a professional athlete. I remember the visceral reaction when I saw my check in my first year in the NFL and I saw like that first line, that gross income line. Okay, man, this is what I thought I was getting. You keep on going down and down and down and you look at all these taxes and it's about almost half, little more than half was still left, almost half taken away. And I'm like, whoa, where did the rest of my money go?
And so there's this deal where like when it comes to these W-2 wages, wages you get from an employer, you may not see it or sometimes if you look at your pay stub, you're saying, okay, where did it all go? But also sometimes we talk about the 1099 income, income you get from other sources where you're not thinking of, I got, let's say $100,000. I'm going to have to pay taxes on that. And it may be, we talk about it, it could be, depends on how much you're making, but could be 40%, right? Could be between, you know, 30, 40% of taxes. And so,
(08:12): It's very hard to think about even when you see it, but especially when you don't, you gotta realize, man, I gotta pay tax on this, and then what are wise ways to pay?
Riccardo Stewart (08:23): Yeah. So, so Zach, just kind of going back to what Jeff was saying, a lot of it, let's say, assume that a kid's at SC. Well, what about if the kids at the university of Texas or the university of Tennessee, where there's no state income tax? Zach, as an NIL athlete, what state do I get taxed in? Where I play or where I'm from?
Zach Miller (08:43): It's going to be where you're from. Now that's initially, it doesn't mean it has to stay that way. So if you are playing, if you're from a high tax state, going and playing in a low or no tax state, you will actually want to be, you don't want to be a dependent of your parents anymore. You want to be essentially supporting yourself to where then you can claim residency ⁓ of that state. And so that's a process.
It helps to have good tax people that can help you advise you along the way there. But if you're ever in that situation where you can lower your taxes, you absolutely should do everything you possibly can to get out of that high tax state and not pay. And whether that's California, New York, any of those places where they're getting you, you want to become a resident of that state with low or no income tax.
Riccardo Stewart (09:31): So if I'm hearing you right, I'm from Southern California and I go play at the, at Syracuse University. Well, both of those are gonna be bad. Actually, let me do another one. Let's just say I'm from Texas and I go play at Syracuse. That's good because I'm actually gonna get, I'm gonna get tax in the state of Texas, I'm good. But if it was the other way around, if I were from New York and then I went to Texas, I would wanna get residency in Texas as fast as possible.
Zach Miller (09:57): Absolutely. And especially it's, it's easy to, it's relatively easy to get that done with the type of NIL income that athletes are earning now.
Riccardo Stewart (10:05): Okay, we get this a lot. We get this a lot with student athletes. We work with all the NIL agents that are there, all the money that comes in and everybody is saying, you know what they need to do? Everybody needs an LLC and everybody needs an S-Corp. Jeff, the professor, could you give us what an LLC is and why one needs it, what an S-Corp is and why one might need it?
Jeff Locke (10:31): Yes, the LLC thinking high level here. All an LLC is meant to do is protect you from liability. It's literally called a limited liability company. So a lot of times you need an LLC when there's the potential of essentially getting sued based on what you're what you're doing in that operation. So for NIL, right, you might be out doing some appearance.
And there might be some risks associated with that appearance, where like you could be driving and hit somebody on the way to it, or you could be employing someone to edit your videos for your social media that go with it, an LLC might make a lot of sense in those situations, because it protects you from liability associated with that income. Okay, so that's the LLC. Go ahead, Rick. What do you got?
Riccardo Stewart (11:18): Does it help me in taxes? Does it help me save in taxes? Because I was told that the LLC, I'm speaking as what we get from the parents and the players. I was told that that actually, I'm good with taxes because I got an LLC.
Jeff Locke (11:30): No, so the LLC actually does nothing for you at all in terms of taxes. If you just open an LLC and start using it, because essentially the IRS sees you as the sole person under that LLC. So they're going to tax the LLC just like they're going to tax you on your, on your tax return. So the second part of this that you brought up is the S-corp status. Okay. So this is things that get mixed up is there's this LLC term, there's this S-corp term.
Jeff Locke (11:58): The easiest way to think about this is the LLC is the account essentially you open. S-Corp is then how you decide to file your taxes under that account. There are two totally different things and two totally different choices you make along the way depending on your situation. And you hit it, you nailed it, Rick. We see a lot of LLCs that have been elected to be taxed as an S-Corp when they really shouldn't be. Because every single state... and every single players type of income, who they're employing, all these things factor into if you actually should file as an S-Corp, because there's also costs with an S-Corp.
We're seeing at least two to three grand of costs associated with just running an S -Corp to try and get the extra tax benefits that an S-Corp might bring you. So you got to actually have a team that can run the calculation for you to see like this S-Corp actually makes sense based on. how I'm making income and how much I'm making income, what state I'm filing in, all these other factors.
Riccardo Stewart (13:04): Yeah, we've seen that it works for some of our players. It's the best thing and it doesn't work for other players. And so the blanket advice that someone of you parents and you athletes and coaches that you get, it might have worked for the person who told you, but that person is actually not you. And so you want to be careful from getting just the blanket advice. You need something that's going to be independent and unique to who you are.
So as we wrap this up, Sam, let's talk from the parental standpoint. You're walking in and you're talking to a parent and they're just going, Sam, I'm overwhelmed. Like, with even like my kid getting this money and how he or she is spending this money. I mean, I just sat in a meeting with the mom and a kid and the mom just absolutely jumped on the kid of like, this is how you're spending your money and it makes no sense. Like just give some advice and some wisdom, you know, for the parents.
Sam Acho (13:52): I think the biggest thing is just the encouragement of the fact that... going to like one of my favorite verses that says that train up a child in the way he should go and when he gets old, he won't depart from it. I say that to say that all that money is is a magnifier. It helps magnify who the person already is money, fame, all those things. And so if you've been training your child and you've been like teaching them, I mean, we hear from so many parents of like, man, my mom was with me since day one and she was waking up or my dad, like training all the stuff that you instilled in your child.
All that the money or fame or success will do will just be to magnify it. And so really an encouragement to like keep on keeping on to the parents that this success that your child is on the precipice of. I was talking to somebody yesterday who, you know, as one of the top schools and we're gonna be a top pick and he couldn't stop talking about his mom and his dad and what they instilled in him and the work and the sacrifice. So really I would say that when your child does get this wealth or this money -
Don't be afraid per se, but make sure that they're the right people around them. We talk about having the right team around you. That's one thing we get really excited about is like, man, who are the people in your circle? We all know that bad company corrupts good morals. And so you already train them well. And so like kudos to you, but also make sure they're making right decisions on who are the people around them because the money will magnify the good, but also will magnify the bad if there is bad. And I know we're all, you know, we all, no one's perfect. So. Money's a magnifier.
Riccardo Stewart (15:28): Good. Well, listen, we have one more episode and next episode, we're going to talk more about investing. What is an individual 401k and why does it matter? What's an IRA? What's a Roth IRA? What's a Roth? All of these different accounts that, you know what, may work for you. If you have any questions on how to choose an advisor, credit cards, building credit, choosing a bank, all of the things you've heard in the last few episodes, please give us a call. Shoot us a text, 602-989-5022. Again, that's 602-989-5022 and for Sam, for Jeff, for Zach, this is Riccardo Stewart signing off.