For many young people, the life of a professional athlete seems like it would be amazing. You get money, fame, and the ability to play a game for living while also have a lot of fun away from the playing field.
Speaking for myself, the mindset I had at 24 would have steered me toward having a nice condo in a trendy area, a great car, and substantial expenditures on food, travel, and fun, had I been a professional athlete making $400,000 annually. I think I would have been fairly responsible overall – after all, at 24 one is a fully-grown adult. Additionally, I would have remained true to my values and continued to be very close to my parents, but wouldn’t have lived with them on a day-to-day basis.
That’s what makes this story I found on Fox Sports to be interesting. A 24 year old athlete who pitches for the Oakland Athletics organization, is a guy who lives at home with his parents. Now, these days that’s not so unusual; plenty of people, 24 years and older, live with their parents. Many families find this to be a way to pool resources and save money.
The difference is that this guy makes $400,000 annually! While it’s on the extreme low end of major league salaries, it’s still a substantial income by most accounts. How many 24 year olds making that kind of money, with plenty of fame, would live at home – when they clearly have many other more exciting options?
Apparently, he would. And frankly, I applaud that. Why not? While the 24-year old version of me wouldn’t have done that, the older version of me thinks that it’s not such a bad idea. At 24 years old, just getting started in life, it couldn’t hurt to live there for a short while. In his profession, there are ups and downs for young players (he was sent to the minor leagues this year), so it’s smart to be careful. He can pitch in at home and help defray some expenses for his folks, since he’s unmarried and not obligated to another person. Plus, it can help him save the rest of his money without doing anything crazy such as buying overpriced property, or having insanely expensive nights out on the town. Wouldn’t it be hard to do that with Mom and Dad right there?
Let’s assume, to make it easy, it comes out to $250,000 after taxes. If he lives at home and helps out, what could his expenses be? Let’s say $4,000 per month? Annually, that’s $48,000 – leaving him with $200,000 after taxes.
Let’s say he takes that 1 year’s worth of savings from living with Mom and Dad, and invests it in the stock market, earning 5% annually after taxes for the next 30 years. In that scenario, that one year of savings by living at home would be worth about $864,000. Granted, this must be viewed in the context of inflation and decreased purchasing power. Nevertheless, that’s quite a benefit for just living at home for one year.
Regardless of what his actual motivations are for living at home, this guy is a good role model for smart financial moves.
Whether or not he is consciously doing it, he is demonstrating two important personal finance actions:
- The ability to differentiate between wants and needs.
- The importance of saving early in life, to open the possibility for compounding to perform its magic
What do you think of this? Do you think it’s smart for a 24-year old making a substantial income to be living at home, or should someone in that position live it up a bit more?