Someone once asked me the following, “Do you know the best way to amass a small fortune? Start with a large fortune.” The meaning behind this statement is that left to their own devices, many fall prey to the temptation to spend more money than they are earning. The end result is that even the wealthiest may eventually discover that their bank account is insufficient to sustain the lifestyle they have grown accustomed to living.
While we all know that professional athletes are paid an incredible amount of money for their athletic talent, we also know that many squander their riches by making ill-advised investment decisions or spending their money frivolously on lavish homes, cars and vacations. Ultimately, living like a multi-millionaire is unsustainable once you cease earning multi-millions of dollars each year.
As the World Series is in full-swing, it is fun to remember that one former baseball player is still enjoying the fruits of his playing-days many years after finally hanging up his cleats by making a shrewd decision about the millions he earned during his career. Who are we talking about, the one and only Bobby Bonilla.
Who is Bobby Bonilla? Bonilla played sixteen years in the major leagues, was the highest paid player from 1992-1994 and made 6 all-star games before finally retiring in 2001. Additionally, Bonilla made one very important decision in 2000: he decided to defer the $5.9 million his former team, the New York Mets, owed him until 2011. During this deferral period, Bonilla received 8% interest per year. Therefore, each July 1st from now until 2035, Bonilla’s former team, the New York Mets, will pay him an installment of $1,193,248.20 as part of his decision to defer his salary. Since these payments began in 2011, Bonilla has collected $8,352,737.40 over the past 7 years. When all is said and done, Bonilla will have turned that $5.9 million into $29.8 million.
Additionally, since Bonilla didn’t have to earn the money in 2000 and collects these payment years later instead, he isn’t paying New York income tax (he lives in Florida, a state with no income tax), or the so-called “jock taxes” for earning money on the road in states that do have income tax. Bonilla is currently 54 years old, so when he receives his final payment from the Mets in 2035, he’ll be 72.
Investing wisely, saving and limiting spending is a good way to ensure financial security for years into the future. If you cannot remember that, just remember “Be like Bobby!” and you will be just fine.