What is life-changing money?

Each person's definition of life changing money may be different based on their backgrounds and personal situations. I know a kid who passed on a large ride to an excellent school with a ranked baseball program to sign for 150K. He had grown up poor and raised by his grandmother. He felt he owed her something financially for al her sacrifices. Because of her he didn't want to go that far away to college. At twenty-two and out of baseball the kid said he made a huge mistake to enter pro ball as a scrawny seventeen year old playing against twenty-one and twenty-two year old men.

 

I think most players with his talent (selected in the early rounds) and intelligence would have declined the money and headed for college ball. For others they may not feel they are academically college material or now for whatever reason is the best time to start the dream.

Consider being a late 1st round pick slotted in the $1.5 to maybe as high as $2mm range depending on what a team does with the cap.

 

As a player if you are going to a State school vs say and Ivy the cost is $35k per year +/- in most states.  So assuming a $1.5 mm deal after taxes and setting aside $150k just in case for college most would have approximately $600-$700k left. 

 

How many years of pay is that?  If they find a job earning $40k starting at age 22 or 23 they will be near 40 before they aquire that kind of money.  If you invest the orignal amount it probably represents a good portion of an average person's lifetime earnings in their hands at 18.

 

On the other side is the cautionary tales of boys vs men, drugs/alchohol/women and injury.

 

It isn't a slam dunk decision. 

 

As you go further down the rounds I think that a decent DI offer trumps pro ball.  If you grow and mature and come out 3/4 years later as a 3rd rounder vs being an 18th round HS player.  You'll have your cake and eat it too.

Last one I heard was 20th rounder... $200K and 4 years of school paid for (to address his college scholarship).

 

He's off to pursue his dream with college money in the bank.

When a 20th rounder gets 200K he probably would have been a higher pick except for being adamant he was going to college. The MLB franchise risked losing a 20th round pick (if he didnt sign) and offered more money than usual for that round to entice him to sign. The MLB scholarship fund is available to all drafted players. The restructuring of the CBA with a signing bonus cap has affected franchise's ability to do these kinds of transactions.

 

Does the kid really have the scholarship money in the bank or the ability to access the scholarship fund? If he has the money in the bank and doesn't attend college what happens to the money?

All the postings said was $200K and 4 years of college paid for by the team....The in the bank was my expression - not actual.

 

Bottom line he reported for his physical.

 

I'm almost certain that the money for school can't be touched unless it's paid to a school down the road. The player can't touch that money if he doesn't go to school. Further, almost all of the money for school goes unused. I'd guess most guys either make enough money to have zero interest in going back to school, or they make so little money that when baseball is over they have to find a job and have no time for school. Regardless, I think the reason teams give out school money is because they know it's unlikely to be used. 

Thats good information to KNOW!

 

My son didn't have the lucury of having to make a decision on "life changing money", however several of his summer / HS teammates had to make some tough decisions.  To date.  2 took offers, 1 turned down the offer and two are still deciding.

Excellent points.

I asked since the other post seemed odd to me. I don't believe signees are handed money specifically for college. They have access to the MLB scholarship fund. Unless the rules have changed they only have six years from signing to access the funds? Someone whose son is in pro ball could probably detail the situation.

We were told that the team that drafts you sets aside money for the player to finish school.  It must be started to be used within 2 years from their release or retirement date and it does not cover the entire amount for school.  As we were told since the school does not provide 100% neither will the team.  That may vary from team to team and by contract to contract.

 

As per life changing money I would think that would vary from situation to situation, one players ceiling is another players floor so to speak. 

As for the college money the kid also has to pay taxes on it upfront.  I heard of a kid this weekend that signed for $7,500 plus college and will end up owing the gov't money.

Scholarship rules for players may be different from a decade ago but my son's contract at that time indicated that he had two years after he retired to begin using the money.  The scholarship amount is negotiable depeding on your prospect status, and it can be generous.  There are some other limitations and guidelines particularly if you live off campus while attending school, the daily stipend is nominal as it seems the scholarship opportunity is skewed much more to the traditional student, i.e., room and board on campus (which of course most players won't be consideriing by the time

they access the scholarship fund later in life). I'm not sure of the exact percentage, but I've heard that the the number of players who actually take advantage of their scholarship funds is very low; and yes, the money is for college only, you don't use it, you lose it. 

 

When considering the possiblity of pursuing a pro career out of high school and bypassing college at first, a young man and his family should consider other expenses that will incur especially since the player is now on his own, not on Mom and Dad's payroll any longer.  After taxes and agent fees, maybe a financial planner, there will be transportation expenses (buying a car) plus insurance premiums (car, disability, professional liability) which a player may wish to consider.  Ongoing living expenses including rent, clothing, utilties, meals on the road, clubhouse dues, training expenses outside of the organizations facilities (if available), charitiable donations, and a host of other miscellaneous expenses will impact the bottom line as well.  Pro sports are notorious for players spiraling out of control with their spending habits; add in some poor investments, or simply the stock market diving unexpectedly, and a player's nest egg can deterioate very quickly without proper guidance and discipline.  Now add it that a low level minor league player will only earn about $800-$1000 per month (and only "in season") and even Triple A players (before they are eligible for minor league free agency) will earn $2500-$3000 per month (again, during the season only, zero compensation during the offseason), a player has to be extremely careful with his financial responsibilites. 

 

I remember a minor league player asking my son "how much do you spend each month after all of your basic living expenses have been paid for?" and my son told him that he spent a few hundred extra dollars per month, and the other player responded "I spend that much extra EVERY DAY!!!" 

The MLB scholarship plan can be confusing.  The amount from the team is not paid to the school or the player but rather a fund.  The player must use that amount for school or he will never get to use it.  Players have 2 years from time they have left the game, to begin school, there are stipulations so make sure when considering you are familiar with how it works. If you try to use it while playing there are stipulations as well.

Here's a hitch, the amount reduces itself everytime the player has a bonus incentive, that means when the player moves up a level and sticks 90 days he gets a reduction in his account.  That is why you often see players moved up and back again because of the stipulation.  Players never given that incentive may move up before someone who will.

My son has 32 credits to complete, the amount given to him to finish has reduced itself by incentives AND the rising cost of tuition that has occured within that time.

Some college programs for those that have a year+ to get their degree, will have funds available to help them with living costs, however, I do beleive there is a time period  for that (I think 5 years).

Life changing money is different for everyone, but always remember that Uncle Sam gets a part of it, and so does the agent.  FYI, the amount due to the IRS is often taken out from the top. I think it is 25% but later adjusted as is medicare and social security.

The bottom line is if the money is important go to school, if it is not, then sign because either way, only a few will only get real life changing money.

 

One more thing, do not think that because you have a great athletic scholarship they will match that. They will only give you as much as they want you. HS draftees drafted high get the lion share of the money because they want them more than the HS guy drafted later on.

What is life-changing money?  I dunno.  I really don't know.

 

9 years ago when our older son was being drafted out of HS, we arrived at an answer.  The team that drafted him didn't get to that number.  I was somewhat relieved...to be honest.

 

As I look back, I think that number we had was far too low.  Even though our son never got close to that number again.  Still, I think the number was too low that we had even back then.

 

I have actually thought a lot about this question over the past 10 years or so.  Mostly just for fun.  You asked it here...and I thought about it a fair amount some more over the last couple of days.  So...other than a Powerball/Lotto kind of number, I just don't know the answer, even for our son...even for me.  

I can remember when $5 bucks seemed like life changing money.   Seriously, for some $10,000 for others it would be $10 million. One thing for sure... Playing professional baseball is a life changing experience.

can a player that was drafted out of high school, leave the MiLB, return to school, then get drafted again?  or once you leave the game, you can't get back? 

 

(sorry had to ask twice)

Once a kid's signs a pro baseball contract his college baseball days are over. When the contract is signed that team holds his rights until he is eligible for free agency or is released.

 

I believe I read an exception once. The NAIA allowed someone who only played short season to return to play. But there were circumstances involved. I think the guy was released after one season, went in the military and wanted to go to college when he was twenty-six.

Let's say he's a two sport player...
can the player return to school, not play baseball, graduate and get drafted again? 

Once a player is signed he is the property of the team until he hits free agency or is released. At either one of those times he becomes a free agent eligible to sign with whichever team he pleases.

 

Players can return to college and play a second sport. It has zero relevancy to the first sport. Danny Ainge, Celtics president played basketball for BYU while in the Blue Jays organization. It turned out he could hit jumpers better than curves and walked away from baseball.

The average person with a degree will make $1 million more than someone without a degree in their lifetime.  You can invest it, but most don't.  You can go back to school, but most don't.  Did baseball get you into a college that you would not have gotten into without baseball?  If so, you will likely be going to a different school if you go back to get your degree.  If you are frugal and invest early and safely, $500,000 (gross) might be good.  If you are like most people, you probably need that $1 million or something very close.

 

IMHO

Getting drafted is what is life changing.... 

To expand further, play pro is a life changing experience.

njbb,

How are you and how is your family?  I am in your next of the woods, Trenton!

mifdaddy - Not sure I understand.  Sign and try proball ...fail ...come back go to school and get the same job as the kid who goes to college and never plays pro ball.  He's got a few years jump on you but you have $500k that might take him 10-15 years to earn.  If you were in a school that was over your head....you weren't graduating anyway.  Plus about 1/3 of baseball playes don't graduate from school anyway.   

 

Then there is this:  Most people never accumulate $500k in savings via a job in their entire lifetime.  If they blow it that is another matter altogether. 

 

Unless you come from a family where there is generational financial security it is hard to see where taking the bet on college for 1st round talents makes any sense.  Especially if you are a pitcher.

Couple items to add... 

1. College fund is negotiable. And you negotiate the percentage college fees vs living expenses.  Not every player will get this. In fact, forget it as a college Sr who hasn't got a degree yet.  And TPM is right: you can negotiate an incentive clause in your contract, but those monies will reduce your college fund.   

2.  I'd like to know which Ivy league school only cost 35K 

3. Life changing? well I'd say you better be a top 10 pick in the 1st round.. but really a player needs to make it to the show and at least into arbitration.  Signing bonus at least 36% is going to Uncle Sam right off the bat.  Then each state your son plays in gets a cut. Then agent fees.  So player may end up with 50%

4 Lets use 50K net as a reasonable middle class living(definitely not extravagant).   A million signing bonus will hold you for max 10 years.  Is that life changing?  And will 50K be same value in 10 years time? Nice beginning, but You'll have another 40 years to worry about.  

5. Baseball also has you under contract for 7 years. (college guys might be 6?)  If you quit early and don't negotiate it out of your contract, they can come back after a portion of the signing bonus.   (Called the Drew Henson Clause)  So out of a million SB you really have only 3 years after baseball, but the player has probably already spent that on a CAR etc.  

6.  Standard first year salary is $1100 a month - only during the season.   Then the players are required to pay clubhouse fees to get their uniforms cleaned etc.  Then most have to buy their own equipment.  Only top players get large sponsorship of equip and most agents limit their contribution to about $1500 worth.    Pitchers this works, Batters not so much.   I remember one year my son spent $3800 on bats and clubhouse fees.  In fact his net AGI was less than that amount.   Yes he HAD to live off his signing bonus.

 

Note: I'd really like to know how baseball gets around minimum wage laws.  Most players are working out starting around noon to 2pm then go to the field stretch BP etc, play  the game until at least 10pm  usually later.  And do this 27-28 days out of 30 days a month and the off days are usually on a bus.   So for well over 280 hours of work you get $1100 or under half of minimum wage.   Then you have half the year without pay, so for the vast majority they need an off-season job.  

 

 

Seasonal jobs are not subject to minimum wage laws. Transportation to work would not count as working hours. If they did count the team is providing free transportation. The players could be paid more and have transportation deducted from their pay.

So RJM   Ski instructors, summer jobs, beach communities, holidays store clerks are all seasonal jobs.  They all have to follow the minimum wage laws. 

 

I believe is has something to do with  the Antitrust Exemption...   but I'd like to know more about it.   Unfortunately, there is not enough money to make a UNION interested.   

Many seasonal jobs are exempt from minimum wage. I don't know if baseball is one of them. Another perspective would be what are considered working hours for a minor league player. I'll guess being in the clubhouse getting dressed is not included. Or showering afterwards. Or travel. Besides the team is providing the travel fee.

SDBB speaks reality. The chances of a player going back to get a 4 year degree after pro baseball is pretty low too.  I'm not saying that giving it a shot isn't worth the dream, but they have to face real numbers going into it. $500k becomes $250k and that become $0 quicker than most would think.

Most players will get very little signing bonuses.

Most players I've met dont play for the money.... Even when they speak about making it to the show, they talked about the perks of being a big leaguer not the salary. (I'm sure that changes with big league Time).  It's the dream that they are sold. 

As far as college .... people will do what they want.. If they want it bad enough...the money is there for them to use.  ..they can even do on line courses while they are playing ball