Three First Steps for College Athletes Managing NIL Money: Taxes, a Budget, and the Right Advice

When a college athlete signs a name, image, and likeness deal, the money arrives with a job description attached: independent contractor. That single classification explains most of what a new NIL earner must do first. Taxes are generally not withheld from NIL payments, so the athlete—not a team or a school—is responsible for tracking income, reporting it correctly, and planning for what may be owed, according to CLA's student-athlete tax and financial planning guidance. The practical order of operations is straightforward: set aside money for taxes before spending begins, build a budget that covers day-to-day needs, and then bring in professional guidance early rather than after problems form.

Step 1: Understanding Tax Obligations as an Independent Contractor

Athletes receiving NIL compensation are typically treated as independent contractors rather than employees, which means taxes usually do not come out of payments before they hit the bank account. That surprises many student-athletes, CLA's guide notes, and the consequences can arrive early: even relatively small amounts of self-employment income can trigger a filing obligation, so filing requirements may start sooner than an athlete expects.

State-level complexity compounds the federal one. MultiState, which tracks NIL legislation, reports that NIL income is generally taxable and that athletes competing across state lines can face complicated state tax obligations. Several states have considered legislation in this area, and Arkansas enacted the first state exemption for certain NIL earnings. Because rules vary and continue to evolve, an athlete's first budgeting decision is not a purchase at all—it is carving out a portion of every payment for taxes before anything else is spent.

Step 2: Building a Smart Budget for Your NIL Earnings

The second step is deliberately unglamorous. EP Wealth Advisors, whose practice works with many college athletes and their parents, describes a starting blueprint of three basic building blocks: budget for living expenses so day-to-day needs are covered without overspending, save for taxes to avoid future shortfalls, and place any excess in a money market account where the money stays accessible but still earns interest. The firm intentionally delays more complex investments during college years, reasoning that there is too much uncertainty to tie up funds that may be needed for immediate expenses or tax obligations.

That uncertainty is the reason budgeting matters so much. Adam Fein of EP Wealth notes that coaching changes, the transfer portal, and injuries can quickly shift the course of a career, and the firm builds plans around what is known and guaranteed—current income and immediate needs—rather than the possibility of a future professional contract that may never materialize. The advisor publication Action Magazine makes the same point with a stark statistic: fewer than 2% of college athletes go on to play professionally, which is why advisors stress financial literacy, budgeting, and saving. Delaying gratification now is not deprivation; it is insurance against a short and unpredictable earning window.

Step 3: When and How to Seek Professional Financial Guidance

The third step is knowing when to bring in help, and the evidence suggests the answer is: early, and with the right people in the room. NIL is still a new and evolving space, EP Wealth cautions, which makes it especially important to work with advisors who understand its unique complexities—and to avoid the opposite pitfall, taking financial advice from social media or from people who may not be qualified to guide them.

Parents and mentors belong in the process from the start. In nearly all of EP Wealth's meetings with college athletes, a parent or mentor joins the discussion, and often both do. Parents frequently raise questions athletes may not consider on their own—how taxes will be handled, what contract terms really mean, or the long-term implications of planning decisions. In the firm's view, leaving parents out of the process would be a disservice to student-athlete clients, since decisions at this stage affect their trajectory for years to come.

Key Areas Where Athletes Seek Financial Guidance

What do athletes actually want help with? A Merrill Lynch study of young athletes examined their financial behaviors, NIL participation, advisor relationships, and planning priorities, and the findings show a population that is more financially responsible than stereotypes suggest. Interest in professional guidance is overwhelming: 88% of athletes surveyed expressed interest in working with a financial advisor, though only 8% currently do. In the meantime, they rely on parents and guardians (72%), online research (62%), and friends and teammates (38%) for information on managing finances.

Their learning agenda is specific. According to the Merrill research, athletes want to learn about investing (82%)—moving beyond basic saving toward wealth-building strategies—tax planning (61%), and building credit (60%) in preparation for major purchases. Their concerns are equally concrete: 74% wish they had saved more money over the past year, 40% fear losing money through bad decisions, and 29% worry about not earning enough to support their goals. Those numbers give a first-meeting agenda: an athlete can walk into an advisor's office already knowing which of these topics applies to them, and a parent can use the same list to frame questions.

Your NIL Financial Action Plan: Three Foundational Steps

The framework below organizes NIL financial management into a sequence of immediate, short-term, and long-term priorities, so an athlete new to significant income knows what to do first, second, and third.

NIL financial action plan: order of operations from first payment onward
Priority stage	Subject	What to do	Why it comes first
Immediate	NIL income	Set aside a portion of every payment for taxes; track all income	As an independent contractor, no taxes are withheld, and filing obligations can start with small self-employment income
Short term	NIL earnings	Budget for living expenses; avoid overspending; hold excess in an accessible interest-bearing account	Covers day-to-day needs without overspending while career uncertainty remains high
Long term	Financial future	Initiate a consultation with a qualified advisor, ideally with a parent or mentor involved	88% of surveyed athletes want advisor guidance but only 8% have it; early help addresses investing, tax planning, and credit
Ongoing risk	Financial pitfalls	Guard against overspending, under-saving for taxes, and unqualified advice from social media	These are the common failure modes advisors identify in the still-evolving NIL space

The sequence matters: taxes come before budgeting because an unreserved tax bill converts a good year into a debt; budgeting comes before investing because accessible funds are what uncertain college careers require. The approach is catching on—Whittaker, a planner quoted by Fox Business, said many collegiate programs now help athletes split their income to account for tax bills, adding that "we don't come across people who have no idea that they have to do some tax planning when they receive the funds very often anymore."

Building Your Financial Future: A Practical Conclusion

College athletes should proactively engage in financial planning by understanding their tax obligations as independent contractors, establishing a budget, and seeking professional guidance early to secure their financial future. This article is foundational education for U.S. college athletes, not personalized financial or tax advice, it does not cover every state's specific NIL laws, and it does not recommend particular advisors or firms.

The measurable indicator of success is concrete: the athlete has established a dedicated savings account for taxes, has a monthly budget in place, and has initiated a consultation with a qualified financial advisor. Reaching those three checkpoints—ideally with a parent or mentor in the room—converts a first NIL payment from a fleeting windfall into the start of a durable financial foundation.

Three First Steps for College Athletes Managing NIL Money: Taxes, a Budget, and the Right Advice

Step 1: Understanding Tax Obligations as an Independent Contractor

Step 2: Building a Smart Budget for Your NIL Earnings

Step 3: When and How to Seek Professional Financial Guidance

Key Areas Where Athletes Seek Financial Guidance

Your NIL Financial Action Plan: Three Foundational Steps

Building Your Financial Future: A Practical Conclusion

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