Portsmouth FC go into administration

Today’s Headline of the Day was chosen to highlight how money and finance impact on all our lives whether we like it or not. Football has been living in la-la land for years now and the news that Portsmouth FC are to go into administration today is simply reality catching up with the game. By placing the club into administration stops HMRC winding the club up completely over an unpaid tax bill of £12m. This is a temporary measure and administration is not a get-out-of-jail card by any stretch of the imagination, as explained in this excellent article on Matt Slater’s blog on the BBC website.

As a huge football fan I sympathise with the Pompey fans as this is sad news. But Pompey’s plight provides a valuable lesson to not only other clubs but to us supporters on the importance of managing your finances.

Amid the chaos of numerous ownerships (to the point where no one is certain of who owns what anymore) Pompey have, like a number of other clubs, borrowed huge sums on the back of potential future revenues. They have financed debt and mortgaged assets such as season ticket sales and merchandising. But now the availability of credit has dried up and reality has made an appearance this house of cards has come crashing down (leaving £70m owed in the process). Sound familiar? It’s exactly what the Government have been doing for years with the public’s finances. But before people get on their high horse Pompey’s plight is the same as an individual who has remortgaged their house or taken out loans and credit cards in order to live the dream, with the view of ‘I’ll pay it back later’. And if you switch on the news you will see there are millions of these individuals who have overstretched themselves.

The underlying theme with all three of these examples, Pompey, the Government and the man on the street is that they are borrowing from ‘Tomorrow’ to pay for ‘Today’. The problem is ‘Tomorrow’ wants his money back and has sent the bailiffs round. (and the end result could well be liquidation/bankruptcy in all three cases)

So while the world of football takes stock of this high profile collapse (and Tottenham Hotspur FC work out who they will now sell their rubbish players to) the lessons we can all learn from Pompey are:

• Live within your means.
• Don’t take out credit for credit’s sake. It has to be paid back WITH interest
• Take charge of your finances before it’s to late
• Don’t bury your head in the sand
• Never owe the Tax Man