Manny Pacquiao, the legendary Filipino boxer, recently proclaimed himself retired after beating Timothy Bradley by unanimous decision. The boxing circuits are rife with speculation and talk that his retirement would be short-lived for a variety of reasons. In a satiation of intellectual curiosity, this article views Manny Pacquaio through the same lens one would with an ‘ordinary, average-income human’ and waggishly asks – is Pacman financially ready for retirement?
Can he afford to retire?
The question asked of typical grey-haired retirees is asked of Pacman too. Manny Pacquiao’s net worth is somewhere in the $200 million range. While this level of wealth is astounding, one should note the often-understated – that no bank account is infallible. Mike Tyson, another boxing legend infamously declared bankruptcy despite a net worth north of $300 million. As such, a more pertinent question might be how much Manny needs, as opposed to how much he has. This is essentially a projection of future expenses that is both pegged to probable needs in the future – money set aside for healthcare, home and automobile purchases, etc. – and somewhat an extrapolation of past spending habits – monthly expenses on food, recurring insurance payments, rental expenses, etc.
Discernibly, the aforementioned estimate of Manny’s future outflows is more colourful than most. Manny has taken up many endeavours. The table of contents on his Wikipedia page is tellingly categorised into ‘Sporting career’ (this includes basketball), ‘Political career’, ‘Acting career’ and even ‘Discography’. Manny will have to determine if the earnings from these ‘careers’ – less boxing – can cover his living expenses on top of the cost of these ‘careers’ in the first place. He spent an estimated $6.6 million on his successful 2010 political campaign. This appears like loose change when he makes 8 to 9 digit sums per fight, but the impact of such costs can be very abruptly and unpleasantly felt when the main source of cash flow – his fights – ends. One can imagine that his other ‘careers’ require sizeable upfront outflows with variable deferred inflows too; for example, producing albums and running a basketball team. These are salient considerations because of Manny’s young age of 37. In all, he needs to have enough money for a significantly greater number of years bearing remarkably higher expenses than the average retiree, to the extent that the $200 million net worth might be less colossal than perceived. As a law of finance and mathematics applicable to all – if outflows exceed inflows, assets will eventually be exhausted.
Habits die hard
Habits die hard, and Manny’s past spending habits can certainly capacitate his future expenses too. Some of Manny’s notable bills include, unsurprisingly, fast cars and expensive homes, and spending $3-4 million to fly 900 of his friends down to watch his bout against Floyd Mayweather last year. Manny is also known for his generosity and philanthropy. While kind and good deeds are highly applaudable, a difficulty in saying ‘no’ to others can often be a drain on one’s finances. This is particularly so when one has already built up a reputation for giving, and there is a psychological bond to maintain that reputation. Indicatively, before the Mayweather fight, fight promoter Bob Arum stated that approximately half of Manny’s fight purse – approximately $100 million – would go to charity.
How should Manny manage his assets?
Only time will tell if Manny is able to navigate through the financial intricacies of his post-boxing life successfully. It is also natural for the financially-savvy to ponder – “Imagine all the passive income I could get from investing if I had that net worth” – and to fantasise about having that net worth and managing it accordingly. To illustrate, putting $10 million into a 5% fixed-income instrument would yield $500,000 per annum. A thoughtful undertaking then, might be to put fantasy to pen and to manage your own assets with comparable logic. $200 million may be 10,000 times of $20,000, but percentages maintain relevance across portfolio sizes. Assigning 5% of a fantasy $200 million worth of assets to a fixed income instrument – as with the above illustration – is less meaningful than actually investing 5% of your real assets – however measly in comparison – in the said instrument.