Apr

3

2025

The NIL Trap: Common Mistakes College Athletes Make with Their Money

Posted by: Nisiar Smith 4.3.25

The NIL Trap: Common Mistakes College Athletes Make with Their Money

Introduction

The NIL (Name, Image, and Likeness) era has opened new doors for college athletes. With the ability to monetize their personal brand, athletes are signing endorsement deals, launching their own businesses, and racking up six and seven-figure earnings; sometimes before even stepping onto a collegiate field or court.

But with great opportunity comes great responsibility. As NIL money flows in, so do the risks of mismanagement, poor planning, and short-sighted decisions. Many college athletes are falling into the same financial traps; overspending, ignoring taxes, trusting the wrong people, and failing to think long-term. The result? An exciting opportunity turns into a major liability.

This article explores the most common mistakes athletes make with NIL money and how to avoid them to build lasting wealth and financial freedom.


1. Mistaking NIL Money for “Free Money”

The Mistake

The biggest trap athletes fall into is treating NIL income like free money or a bonus rather than business income. Because many athletes are young and new to managing money, they often spend quickly and don’t plan ahead.

NIL earnings are not a “gift”, they are taxable income and come with financial responsibilities.

The Fix

  • Treat NIL like a business: Every dollar earned through NIL should be approached with a strategy, just like a pro athlete handles their endorsements.
  • Set up an LLC or S-corp to manage NIL income professionally.
  • Keep a portion of every check for taxes, savings, and investments.


2. Failing to Plan for Taxes

The Mistake

Many athletes don’t realize that NIL earnings are considered self-employment income and are fully taxable. Because there are no automatic withholdings like a traditional job, athletes can find themselves owing thousands in taxes they didn’t prepare for.

If not addressed early, this can lead to tax debt, penalties, or even legal issues.

The Fix

  • Set aside 30–40% of all NIL earnings for taxes.
  • Work with a tax professional to understand quarterly payments and deductions.
  • Track every NIL-related expense like travel, marketing, legal fees for potential tax write-offs.


3. Overspending on Lifestyle

The Mistake

As NIL money rolls in, many athletes start spending like pros; buying new cars, designer clothes, expensive trips, and flashy accessories. Without a budget or financial discipline, this behavior leads to burned cash and zero long-term value.

This is particularly dangerous because most NIL earnings are not guaranteed long-term.

The Fix

- Create a monthly budget based on real income and goals.

Use the 50-30-20 rule as a starting point:

  • 50% for essentials
  • 30% for discretionary/lifestyle
  • 20% for savings and investments

Enjoy your success, but do it with a plan.


4. Not Having a Financial Team

The Mistake

Some athletes try to manage NIL on their own or worse, rely on friends and family who lack professional experience. This can lead to costly mistakes in taxes, contracts, or investments.

Others sign with agents or advisors without fully vetting them, only to discover conflicts of interest or poor advice.

The Fix

- Build a trusted financial team that includes:

  • A financial advisor
  • A tax professional
  • An attorney to review contracts

- Always vet your advisors. Ask about credentials, experience with athletes, and how they get paid.

- Don’t be afraid to switch if your team isn’t helping you grow and protect your money.


5. Signing Bad Deals Without Understanding the Fine Print

The Mistake

Many athletes rush into endorsement deals without reading the full contract. Some deals include:

  • Exclusivity clauses that block future opportunities
  • High agency commissions
  • Vague deliverables with legal liability

This lack of clarity can tie athletes to unfavorable terms or legal risk.

The Fix

- Never sign anything without having it reviewed by an attorney.

Ask key questions:

  • How long does the deal last?
  • What are you required to do?
  • What happens if you transfer schools or go pro?

-Prioritize deals that align with your values and brand.


6. No Long-Term Financial Plan

The Mistake

Many athletes view NIL as a temporary windfall, not a tool for long-term wealth. They fail to set financial goals, save for the future, or invest in meaningful assets.

When the NIL deals dry up or the college career ends, they’re left with little to show.

The Fix

  • Define clear financial goals: Saving for a home, investing, launching a business, or funding a retirement account.
  • Start building an emergency fund with at least 12 months of living expenses.
  • Work with a financial advisor to create an investment strategy focused on long-term growth.


7. Ignoring Brand Building

The Mistake

Many athletes focus only on the money, not the personal brand that creates long-term value. Without a strong brand presence, deals slow down and NIL potential fades quickly.

The Fix

  • Build a consistent brand on social media: Share your story, values, and off-field interests.
  • Engage with your audience: The more you connect, the more NIL value you bring to sponsors.
  • Treat your NIL presence as a launchpad for future opportunities; broadcasting, business, coaching, and beyond.


8. Failing to Diversify NIL Income

The Mistake

Some athletes rely solely on one or two big NIL deals, often short-term or tied to performance. If those end, so does their income.

Others pass on opportunities because they’re too focused on big brands, ignoring smaller local businesses and partnerships.

The Fix

  • Diversify: Look for multiple income sources—brand endorsements, social media content, personal merchandise, and appearances.
  • Consider equity: Instead of just a cash payout, explore NIL deals that offer ownership in startups or small brands.
  • Think entrepreneurial: NIL is a chance to start your own business or side hustle while in school.


9. Forgetting the Bigger Picture

The Mistake

It’s easy to get caught up in the excitement of NIL deals and overlook what comes next, graduation, a pro career, or transitioning out of sports altogether.

Some athletes burn bridges, post carelessly on social media, or make financial decisions that hurt their future.

The Fix

  • Keep a long-term mindset. Every decision today impacts tomorrow.
  • Stay focused on school, performance, and character—it all contributes to your brand value.
  • Use NIL as a tool to prepare for life after sports, not just a paycheck today.


Conclusion: Win Off the Field, Too

NIL is one of the biggest opportunities college athletes have ever had, but it’s also one of the biggest responsibilities.

Without smart planning, what starts as a major win can turn into a financial trap. But for athletes who treat NIL like a business, build the right team, and make intentional financial decisions, it can be the start of something bigger; financial freedom, personal growth, and lifelong opportunity.

Want to make the most of your NIL journey? Let’s talk. We help athletes create a financial game plan that turns short-term earnings into long-term wealth.