On July 1st, a baseball player named Bobby Bonilla received a check for $1.2 million dollars from the New York Mets. While this is not newsworthy in and of itself, you might be interested in learning that Bobby Bonilla hasn’t played for the Mets since 1999. What’s even more surprising is that Bobby Bonilla will continue receiving $1.2 million dollar checks on July 1st until 2035 (for *not* playing baseball). If this sounds shocking, it is, but only because Bonilla a lump sum payment he was owed into an annuity. This article from Financial Freedom Countdown explains the contract and discusses who got the better deal.
In 2000, Bobby and the management realized that they were not a great match. The Mets wanted to get substitute Bobby Bonilla. But they still owed him $5.9M on his contract. The Mets agreed to buy out the amount on his contract. But the Mets also needed the money to bring a new player. So instead of paying Bobby the $5.9M in 2000, the Mets agreed to defer the payment to the future. They would make annual payments of nearly $1.2 million for 25 years starting July 1st, 2011, including a negotiated 8% interest.
The Mets wanted to cut Bonilla, however, they still owed him $5.9 million dollars on his contract. The Mets were having a great season and wanted to use that money to sign another player to help their playoff push and talked to Bonilla about restructuring his payment. As someone who grew up in poverty, Bonilla was interested in having long term financial security. His agent, Dennis Gilbert, worked out a deal with the Mets where they wouldn’t need to start paying Bonilla for over a decade. At that time, they’d need to pay him $1.2 million per year for 25 years. While at first glance, $25M seems much larger than $6M, these payments are equivalent at an 8% interest rate (or rate of return). This contract (while often mocked by sports fans) gave both the Mets and Bonilla what they wanted and is a great illustration of how a pension or annuity works. One sad footnote: at the time the Mets were confident they’d be easily able to earn more than the 8% rate of return they were guaranteeing Bonilla because they were investing with Bernie Madoff who guaranteed returns of at least 10%. We all know how those investments worked out.
We often talk about side hustles on Monday Night Finance. Side hustles are a form of self employment that you can do outside of your normal, 9-5 job. Writing and blogging often top lists of best side hustles. While there are hundreds of articles about starting a blog, you will want to make sure that you do it right. Many blogs fail within the first year. This article from Financial Wolves breaks down how to start and run profitable niche blogs.
Once you have your formula down to start, scaling and selling a blog you want to do it for the rest of your life. I’ve started several blogs, scaled and sold them for decent profits. I’ve sold 2 different niche sites for over $250,000 in a span of 1 year. That was all being done as part-time work and during my first foray into niche blogs.
Financial Wolves presents seven steps for building a profitable blog from scratch. The post is filled with infographics that help illustrate key points succinctly. The first several steps involve pre-planning. What kind of website do you want to run, what niche do you want to target, and how do you plan to monetize the blog. Blogs are typically monetized by display advertising, affiliate advertising, or selling your own products or services. These three different revenue forms range in difficulty of execution and also amount of potential profit. Many blogs are monetized with a combination of the three types of revenue, however one is often emphasized the most. After that, you’ll want to find a domain name, hosting plan, and a WordPress theme. Google now heavily emphasizes page speed in its search engine results, so you’ll want to make sure you find a lightweight, responsive theme that loads rapidly. The final steps involved building your audience. You’ll want to check out the article for lots of great tips on building and growing successful blogs.
FIRE stands for Financial Independence/Retire Early. CountAbout has some great FIRE tools to help you track your progress towards financial independence. One big part of pursuing financial independence is tracking your expenses. Once you know your expenses, you can calculate your needed nest egg to support annual withdrawals to maintain that lifestyle. One interesting aspect of FIRE is that expenses are strongly dependent on location. Chrissy by Eat, Sleep, Breathe FI has been running a blog series where she interviews FIRE people from around the world and compares their cost of living. In this post, she interviews Steve from Arkansas who blogs at SteveArk.com.
Hello, and welcome to interview #11 in the How Much Does it Cost to Live the FIRE Life interview series! Part interview, part spending report, this series will introduce us to FIRE* seekers from all over the world. They’ll reveal their essential spending and money-saving tips—all to help us learn new ways to save on our own expenses. As a bonus, we’ll also get to discover the unique advantages and challenges of living in different places around the globe.
As the blog name implies, Steve lives in Arkansas, specifically rural Arkansas. Although Steve is quite wealthy compared to the average American, they are able to live for about $60,000 per year. While most American’s biggest expenses are housing, transportation and food, these expenses amount to less than 1/3rd of Steve’s annual expenses. In fact, Steve’s medical expenses are larger than these “big 3” expenses. Healthcare is certainly a major expense for most Americans, especially those who do not receive health insurance through their jobs. If you’re considering early retirement, you’ll definitely want to check out Chrissy’s series on the cost of living the FIRE life on her blog.