How I will spend Manny Pacquiao's $120 Million earnings - Lazy Investing Way

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Saturday, January 30, 2016

How I will spend Manny Pacquiao's $120 Million earnings



I know what you are thinking, we should move on from the Mayweather vs. Pacquiao's Fight (or Flop) of the Century! Well I won't be talking about the fight but the money that came out of the fight. Based from reports, the recent fight alone is expected to give Pacquiao upwards of $100-120 million.

We knew the Pacquiao vs. Mayweather fight would bring in a lot of money, but we didn't know precisely how much. [Let us focus only on Manny's earnings] To give you some context, the over a hundred  million USD payout (minus taxes) is higher than more than a hundred countries' annual GDP. You can also buy a private island or two (see here for prices).


Manny Pacquiao's Financial Snapshot:
Pacquiao is wise enough to learn from the follies of other star athletes who squandered a lifetime of wealth. Whether these businesses are generating profit and whether he manages them himself or if there is leakage of revenue/profit and if taxes from these are managed, is anyone’s guess.

Based on his 2013 Statement of Assets and Liabilities (SALN), Pacquiao declared total assets of Php1.8 billion ($40.34 million) – Php1.1 billion ($24.65 million) in real properties and Php763 million ($17.10 million) in personal properties. He has liabilities of PhpPhp527 million ($11.81 million), for a net worth of Php1.3 billion ($29.13 million).

Together with his wife, they run several businesses: water refilling station, fashion boutique, gasoline station, arcade building, dermatology clinic, economy hotel, merchandise store, among others.

Now I'm not going to be his financial planner since I'm not; though I am more of a financial education advocate so let's just pretend a hypothetical scenario for now that I was the one who earned that USD120M. Remember this is just freakin' "PRETEND."

Assumed Deductions:
Let's assume some deductions; since we are pretending that I am a one-time boxer who earned $120 Million, here are some things we must deduct based on the fight outcomes.
  • Let us deduct the $4million on tickets for "my" huge 900-pax-entourage
  • Let's assume that the same cost as above is for cost-of-living and travel expenses of the same entourage going to US and back to PH
  • I failed to disclose that shoulder injury, I'll pay that damned fine of $5,000
  • fighting in Las Vegas again is taxing, with the 39.6% U.S. rate - #PAKSHET
  • let's be good tax payers now, so I'll pay that IRS federal tax lien for $18.3 million against him
  • I'm not a tax expert of US and PH tax-related laws and procedures, so let's keep it simple and use straightforward calculations
  • The MGM Grand Hotel & Casino, the fight site, has been selling standard rooms at $1,600, compared with the typical $270 a night. So having a 900+ entourage and we can fit 5 people per standard room, (900 / 5 = 180 x 1600 cost per room) that's about USD288,000.00 a night; for 3 nights that's USD864,000.00
  • Heck let's throw in a budget of USD1,000,000.00 for food and plane tickets
Okay, that's a lot of deductions already. Let's deduct (ouch) all that from USD120M. The remaining amount is $48,311,000; convert that with foreign exchange (Php44.5 to $1), we have: Php2,149,839,500. Ah that's still a billion in Peso! OMG!

Just so you know, for individuals earning purely compensation income and those engaged in business and practice of profession, the applicable tax rate individuals earning more than Php500,000 is at: Php125,000 + 32% of the Excess over Php500,000 in 2000 and onward.

Let us consider this as income earned by an OFW, and I've paid taxes to US IRS already damnit! The Bureau of Internal Revenue (BIR) reiterated the tax treatment of income earnings and money remittances of OFWs in Revenue Regulation No. 1-2011 signed on February 2011, and amended in part by Revenue Regulation No. 11-2012 issued on August 2012.

To be officially recognized as an OFW, the Filipino must be duly registered as such with the Philippine Overseas Employment Administration (POEA) and must possess a valid Overseas Employment Certificate (OEC).

Philippine taxation laws require all Filipino citizens to be taxed based on the taxable income derived within and outside the Philippines. That means, regardless of source and its location, all incomes earned by citizens of the Philippines are taxable. However, as reiterated in the BIR’s Revenue Memorandum No. 1-2011, the wage or income of an OFW ” arising out of his overseas employment is exempt from income tax.” -- WHEW!


How I will allocate the remaining money:
Invest in myself 
  • Free; What? Financial education is always a good investment (join seminars, learn x4)
  • This is a one time big money in flow so I'm gonna live within my means. Spend less than what you earn every month basically.
  • Have at least 6 months worth of your expenses as emergency fund. For this case, let's allocate a year of expenses of Php240,000.00, wait let's make it  years worth emergency fund (I can afford *wink), so that's Php1.2Million.

Total = Php1.2M

Low Risk Investments
  • Cash Deposits (time deposits in 5 banks, 5 million total within 5 years: Php25M)
  • Bonds (savings bonds, government bonds, treasury bills, etc.) - I'm not knowledgeable in these so I'll pass
  • Insurance (term life, VUL, long-term healthcare, etc.) - I'm reasonably healthy, I'll get a 15-year term life insurance worth Php1Million and a long term health care plan of the same amount

Total = Php27M

Medium Risk Investments
  • Network or Multi-level Marketing business - this requires time and I'm gonna be travelling.
  • Medium-size business enterprises (medium-cap franchises) - I'll consider having multiple stall franchises located in upcoming malls like potato corner, thristy; which I'll set aside Php10Million in both franchise and start-up capital
  • Real Estate (private equity funds, real estate investment trust funds, etc.) - I have not heard/found one here in the Philippines

Total = Php10M

High Risk Investments

  • UITF and Mutual Funds (note: there are also low to medium risk versions of this; equity funds, foreign currency funds, etc.) - Php50M for 5-7 years
  • Large-cap businesses (master franchising, corporations, etc.) - I'll invest in bigger franchises such as Jollibee, Mang Inasal, a fuel refilling station, a bakeshop; I'll set aside another Php60M both for franchise cost and start-up capital
  • Stock Market and Currencies or Forex (trading, speculative investing, etc.) - I will set aside Php20M for both for 5 years
  • Real Estate (property flipping, acquisition of rental assets, etc.) - no skill for flipping, I can buy a condo or three worth a total of Php15M for rental or to be sold off within 5-10 years.

Total = Php165M

Other Investments
  • I need a holdings company to monitor those franchises = Php10M for start-up
  • I'll set-up a small VC firm for tech & social enterprises :D = Php50M (that's well over $1M)
Total = Php60M

Expenses
  • I'll set aside Php5Million travel expense for 5 years - which I should not use up in that period
  • No house and lot? Yup, I don't want to pay excessive taxes :P so either I'll stay in a condo or rent out a reasonably sized place.
  • No car, because they depreciate in value and eat away your money (maintenance, fuel and like costs
  • Another Php5M for liquidity and other random expenses for 5 years

Total = Php10M

Overall total = Php273,200,000.00


Php2,149,839,500 (remaining amount of earnings) - Php273,200,000 (Overall total of my spend) = 1,876,639,500.00 left

Well sh*t, that's still a lot of money. If I were to triple the overall total spend (additional expense and investments) in which I shall use for the next 10 years, that will still leave around Php1,330,239,500.

Even if I set aside Php30M in campaign funds, run for a political position and not win, set aside another Php170M for charity/donation projects to various foundations and advocacies or the Church, I'd still be a theoretical billionaire in Peso.

To think we have not even considered taxation yet (let's say even without tax avoidance strategies)! Capital Gains Tax, Donor's Tax, Business Taxes,..blah blah..it doesn't matter, that's how rich Manny is!

And we have not even considered the calculations for the "growth" of these investments (rental income, dividends, MF/UITF/Time-deposit growth, franchise & business income, dividends,..etc.). I guess with this amount, I can ride off to the sunset and my family is set for life. Heck, there is still enough money left to make some sort of group of companies like the Ayalas or Aboitizes.

I'm having a headache, perhaps it is indeed not easy spending one's earnings of $120 Million. All that is left for Manny to consider now is to have a Tax and Estate Planner for his Children.

Good Luck Manny Pacquiao, now I know, you know!

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