NFL player Rob Gronkowski became famous in January 2019 for more than his football prowess. He was retiring after nine seasons … without ever having touched his NFL salary. He had “frugaled” his way through his career, living on his endorsement money. This helped him save over $50 million.
Understandably, few of us will have the ability to save that same amount, however, let's explore what we can learn from him about the often-taboo subject of money and savings.
Live Within Your Means and Save for Retirement
According to Yahoo Finance, Americans are delaying retirement, and 64% of them will retire broke. It’s predicted that another 19% will retire with less than $10,000. This paints a grim picture for retirement if you’re not careful. Saving for your golden years is about ensuring you don't retire without the gold. To do that, you have to live within your means.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For Gronkowski, his means were equivalent to the income generated from endorsement deals, and not his unguaranteed NFL contract. Gronkowski realized that living within your means is not about the digits on your paycheck. Instead, it is more important to pay more attention to your net income.
The lesson for us all here is that you should prioritize saving before spending so that saving money becomes a habitual part of how you manage your finances.
Gronkowski's Advice to Young People
Financially, Gronkowski lives by a core principle to “keep it simple,” meaning he buys only what he needs to be comfortable, and nothing more. But being “simple” is not appealing to most people. Simplicity directly goes against the flashy, high-fashion, materialistic influencers that many people aspire to be like. However, life is about more than status symbols and materialism, and keeping it simple pays off when it comes to saving money.
For Gronkowski, being fashionable means wearing the same pair of shoes or clothing items until they are worn out. Sometimes he'd wear the same pair of jeans for a whole week, washing them around the third day and re-wearing.
The lesson here is not to turn against buying necessities, but to change your definition of what a necessity is. A necessity is something you can't live without. Scrolling through online shopping websites, filling up wish lists, and adding endless items to your cart are all “wants” that often get confused with necessity. This is a slippery slope that encourages the accumulation of credit card debt.
Gronkowski's “keep it simple” principle is about spending money wisely. Avoiding unnecessary purchases leaves you with money to put into long-term financial goals. You can retire sooner rather than later if you adopt a savings culture that supports your retirement goals.
Why You Should Apply Gronkowski's Advice to Your Finances
Although Gronkowski's contract was worth $54 million, he knew it was not guaranteed. This changed his values and shifted his focus to what was important: his future financial prosperity. Although we don't like to admit it, income is not predictable. COVID-19 made that abundantly clear.
Your value system helps you separate what's important from expensive frills. Start by recording where your money goes. It will keep you from retiring broke. A record of your spending reveals the loopholes in your value system, like spending $1,000 on shoes you'll wear just once or $10,000 on a birthday party with zero returns.
To calculate how much you should be saving for your retirement, you should first calculate your expenses and project them into retirement (with inflation). By using a reasonable distribution rate to live off of in retirement — say something between 4% and 6% of your nest egg withdrawn on an annual basis — you can figure out how much you need saved up to support that amount. Then, you discount that back using a reasonable rate of return, from 5% to 7%. By using this simple method, you have a better idea of how much you will need in the future and how much you need to save now to make it happen.
Wondering which habits drain your finances? Keep a daily, weekly and yearly budget to find out. You'll also get a rough idea of the amount of money you'd have saved up by now. You'll be able to create a budget of what's comfortable, not flashy, and stick with it.
Preparing for Retirement: Saving More Than You Spend
Some people are frugal by nature, or they grew up on hand-me-downs like Gronkowski and learned the simple way to live. Others are not so good at it. If you're a spender, shift your mindset from spending today, to saving for tomorrow. Material possessions and products wear out over time, but investments are available for a lifetime.
Through making simple swaps in your daily life for more financially savvy choices, you can save money over time, without sacrificing the things that are most important to you. There is no reason why you can’t enjoy your “wants” while still staying within your means. A good rule of thumb is to avoid putting money on a credit card unless you can pay it off without borrowing.
Shifting your mindset to prioritize savings over excessive spending starts and stops with you.
-
How Lower Interest Rates Affect Your Finances: Credit Cards, Car Loans and MortgagesThe Fed's rate cut will provide relief for some borrowers, but savers will have to work harder to get decent returns.
-
Four Ways to Maximize Your 401(k) Contributions Before the Year EndsTo maximize your 410(k) contributions in 2024, assess how much you’ve contributed so far, check your employer’s match, take a look at your budget and consider increasing how much you set aside per paycheck.
-
For a More Secure Retirement, Build in Some 'Safe Money'To solidify your retirement plan, write it down, reduce your market risk and allocate more safe money into your plan for income.
-
Five Steps to a Mindfully Fearless CareerIf, like many women, you're struggling with imposter syndrome, try developing an athlete's winning mindset. It's as simple as facing one small fear every day.
-
Six Ways to Optimize Your Charitable Giving Before Year-EndAs 2024 winds down, right now is the time to look at how you plan to handle your charitable giving. The sooner you start, the more tax-efficient you can be.
-
How Preferred Stocks Can Boost Your Retirement PortfolioHigher yields, priority on dividend payments and the potential for capital appreciation are just three reasons to consider investing in preferred stocks.
-
Structured Settlement Annuity vs Lump-Sum Payout: Which Is Better?As the use of structured settlement annuities grows, it can be tough to decide whether to take the lump sum to invest or opt instead for guaranteed payments.
-
What to Do as Soon as Your Divorce Is FinalDon't delay — getting these tasks accomplished as soon as possible can help you avoid costly consequences.
-
Many Older Adults Lack Financial Security: What Can We Do?Poor financial literacy and a lack of foresight have led to this troubling reality. It's going to take tax policy changes, education and more to address it.
-
Winning Investment Strategy: Be the Tortoise AND the HareConsider treating investing like it's both a marathon and a sprint by taking advantage of the powers of time (the tortoise) and compounding (the hare).
