By now some of you have likely heard of Minnesota Twins pitcher Phil Hughes, even if you aren’t a baseball fan.
Why would you have heard of him? Because he turned down half a million dollars.
Hughes has an incentive in his contract that says if he pitches 210 innings in the 2014 MLB season that he would receive an additional $500,000. He ended the season with 209 2/3 innings, just 1/3 of an inning shy of a half million dollar payday.
If you read about his situation in articles such as this one in Forbes, you may have been led to believe that a rain delay was the cause of his ill fate. While there is certainly some truth to that, it leaves out another part of the story.
Twins manager Ron Gardenhire offered Hughes the opportunity to come into a game as a relief pitcher in one of the final games to record the final out he needs to get the half million incentive.. Hughes declined the offer, saying the following:
“I just didn’t think it was right,” Hughes said before the game against Detroit. “If I were fighting for a playoff spot, I’d 100 percent be available. But given the circumstances, I don’t think it’s the right thing to do.”
“I owe too much to this organization for the next two years to risk getting hurt for an incentive,” Hughes said. “For whatever reason it wasn’t meant to be. There’s a lot bigger problems out there. I’m proud of my season.”
This leads me to my question: could you say no to half a million dollars?
This is a fascinating personal finance story for so many reasons. My initial thought was this: Very few people can relate to Phil Hughes situation. Hughes has a 3-year $24 million dollar contract with the Twins. He’ll make $8 million dollars a year for three years. Before taxes, Hughes is making just under $22,000 a day, even in the off-season and games where he doesn’t play. Hypothetically speaking, if you average out the $500k bonus over the course of his 3-year contract, Hughes would only be making an additional 2%.
I don’t know about you, but I don’t know many employees who get that excited about a 2% raise. Imagine Hughes who literally is making more money in three years than he can spend in a lifetime. What’s another 2%? This doesn’t even count any money he’s made before this 3-year contract or will make after this contract is finished.
Asking an average person – even someone who is in the upper middle class – if they would be able to say no to half a million dollars for a few minutes of work isn’t even remotely close to Hughes’ situation.
How can this relate to a “regular” person?
In an effort to make this relate to the everyday person, I think we should view this situation as a question of integrity and short-term versus long-term trade-offs.
First of all, Hughes said he didn’t feel it was right to go out there and try to get an extra out just to get a performance incentive. Would you be able to say no to quick money that you didn’t feel right about?
Second, I think there’s something to be said about saying no to something that seems attractive in the here and now that might hurt you long-term. One reason Hughes didn’t want to attempt the extra out is because he didn’t want to risk injury. Imagine if he had a terrible injury in that one inning and had to retire from baseball early. He not only risks (potentially large) future earnings, but he also will never again play a game he loves.
I wrote a post earlier this year titled 7 Reasons to Turn Down a Higher-Paying Job Offer. Turning down a higher-paying job today because it might limit your future earnings is a great example of a situation where thinking long-term can force you to turn down an immediate increase in money.
I myself went through this in my latest job search. There are many companies willing to pay about $10k more a year than my current employer (this is public information available on sites like PayScale and Glassdoor). Long-term, though, switching companies and taking the immediate increase may hurt my long-term career prospects. I took an internal promotion instead.
So, while I honestly would have trouble turning down half a million dollars, I can say that I’m willing to turn down an immediate increase in pay if it has negative long-term implications.
Have you ever turned down an increase in money because of it’s potential long-term implications? Can you imagine getting paid $8 million a year for 3 years?
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I turned down a promotion at my last job that was higher paying than my current position because I knew I wouldn’t be happy. It actually wasn’t that difficult of a decision because of how very much I wanted to leave my previous employer. But, if it had been a $500K offer…. that would be a different story :).
if someone told me I was getting a 2% raise I wouldn’t be all that excited (although every little bit helps). But if someone asked me if I wanted a 2% bonus in one lump sum right now, I’d be very excited – and take it in a heartbeat. While I appreciate his want to show loyalty to the team and not hit them up for 500K, first, BOTH sides signed the contract and he’s still have to provide the service for the 1/3rd an inning. I would have marched out to the mound and got that out. :)
It sounds like he made a reasonable decision given his circumstances. And maybe he feels like he had a great year and doesn’t want to push it.
And no, I cannot imagine getting paid 8 million dollars in one year. I would be retired by now!
I think this is a great story. It seems many of these athletes, even with their multi-million dollar contracts, will do anything for even more cash. Phil Hughes made a wise decision. He knows he has more than enough and isn’t willing to sacrifice integrity for greed. Awesome.
I think it’s always important to think long-term instead of short-term when it comes to your career. I’ve been at my current job for exactly 1 year. In this time, my salary has risen 20% since leaving my last job just out of school. It was a great bump but I don’t expect to see my salary rise this sharply for a long time to come. Sure, I could switch jobs again and probably get a 5-10% bump in pay, but I like the company I work for, and the work that I do. It’s also located close to my house = shorter commute.
Well first it’s very hard to relate to that exact situation. He has the luxury of bypassing that bonus. For me, I turned down a good full time job offer when I knew I was getting laid off, for a company I was not excited about and where the working situations (stuffed in a room with a bunch of other people) wouldn’t be what I’d like. Do I regret it (since that is how I kind of got forced into freelancing)? Sometimes I think what might have been and how life would be different, but I probably still wouldn’t change it. There are so many other great things that have happened as a result of me bring a freelancer. I sometimes wonder what my answer would be if they offered me that same job right now though…
I’m guessing $500,000 to him is like a dime to me. Not worth straining something just to bend over and pick it up sometimes. :P
This reminds me of why many people are going to North Dakota. The work sucks, but you only have to work a fraction of the time it would take to earn the same money in a lower paying job. If it only paid 2% more, no one would do it. Baseball would not suck if that was your job, but I can totally understand his thinking. If it was a 50% bonus, I wonder if his answer would have been different.
Didn’t hear this story…but I remember Phil Hughes from his Yankee days…he was supposed to be a can’t miss prospect. He must have had a decent year if he pitched over 200 innings. Like you said someone making $8 million turning down half a million is a different circumstance. But money isn’t everything…really. I’ve taken a pay cut to take a different job because I thought it would help my future prospects. Sometimes you need to look at the long term like Hughes did by not risking injury.
When you think about the actual percentage and his potential risk of getting hurt, I think the decision was easy for him. Why risk getting an injury just to get a 2% one-time payout?
Mrs. Frugalwoods That’s impressive because I know a lot of people would not be able to say no to that promotion. Haha yes, $500k is a different story and hard to relate to our lives.
DebtChronicles Haha I think I’m with you on this one. It’s 1/3 an inning! I would totally go out there and give it a go. Yes it would suck if you got injured but what if you got injured your first outing of the next season? It would be the same deal.
Holly at ClubThrifty Exactly! If I made $8M I would be retiring really quick haha
BudgetforMore It’s important to factor in all the variables, as you clearly have. I could have left my employer for a decent pay bump, but there are many positives of working where I work so I took another position here versus looking elsewhere.
Beachbudget I think it’s hard to not look back and think “what if?” What if in the pitcher’s last outing of the season there was no rain delay? It’s good to reflect on the past but I think you are smart for looking at the positives that came out of rejecting that job.
kay at frugalvoices If you got offered 2% of your income for bending over and picking it up, I think you would!
Eyesonthedollar Yeah I think if it was a bigger bonus – like $4M, he would maybe give it a go. Then again he’s got a (relatively) long career ahead of him so he probably figures he’ll make close to $70M+ over his career.
Andrew LivingRichCheaply Hughes seems to be mature by professional athlete standards. I’m sure about 90% of players would get out there and pitch the extra 1/3 inning. He did have a decent year despite the fact the Twins as a team had another horrible year.
DebtRoundUp It’s true, and I think he’s smart for thinking in terms of percentages (at least I’m assuming he did?). I think he’ll be happy long-term with the decision.
I think money has it’s place, but like many things in life sometimes it’s more than just money. Could be your career, your morals and beliefs, etc. I also say good for him to pass it up based on his standards.
I am impressed that he thought it through so carefully. Not just whether it felt “right” to do it in the moment, but also the long-term impact. Because as you noted, $500,000 is a lot of money to you and I, but to him, it’s pennies. And not worth risking injury when compared to what his long-term earning potential is. It’s actually really refreshing to see an athlete think long-term and be responsible with their money since we hear of so many of them burn through the millions they make with little to show after their career ends. I guess I technically don’t know that he’s not frittering away his money, but his actions here at least give me hope that he’s not! And I hope if faces with a similar circumstance, I’d look long-term too. :)
Props to Phil Hughes in this situation. Honestly I’m not sure if I could have did that. There is so much that I could do with half a million dollars.
Wow, very well written and told story here DC!
I haven’t been in a position to do this no however it would be a real stretch for me not to turn down an increase for long term implications, having said that I’m impressed by Hughes’ foresight that the extra 2% he may have earned probably wasn’t going to increase his happiness by much and the potential downside was high..
Who said common sense was dead? haha :)
EvenStevenMoney You’re right, you can’t just factor in the money. He clearly factored in his career and prioritized it over the one-time payday.
ShannonRyan It’s really strange to see an athlete thinking things through long-term! I think he’s smart and you can have a LONG career in baseball if you play your cards right. He’s clearly making a lot of money and will be on pace to make even more if he keeps thinking of his career as long-term.
Jason @ The Butler Journal I think there are a LOT of people – including very wealthy athletes – who would not have the discipline to pass up the $500k. I know most “regular’ folks would have trouble imagining passing it up, but I think even athletes would be hard-pressed.
mycareercrusade Thanks for the kind words! I would have a lot of trouble personally passing down the $500k. I would just tell myself “okay the risk at injury can’t be THAT high, and it’s only 1/3 an inning!”
DC @ Young Adult Money Yea, you’re right. And honestly since it was just 1/3 of an inning it would kind of suck to miss out on half a million dollars. Sure athletes make a lot of money, but the owners make so much more. The Twins should just give him the bonus!
Andrew LivingRichCheaply DC @ Young Adult Money They actually CAN’T give him a bonus. They were discussing it on the radio around the time and it would be a violation of the player’s union agreement. So they literally CANNOT hand him the half million. They did offer to let him pitch the 1/3 inning out of relief, but as we both know he turned that down.
That’s a good call, I personally probably wouldn’t either, it’s sort of refreshing though to see that he doesn’t actually care that much about money or the extra money..
Then again a nice gesture could have been for him to donate the extra 500K to charity :) haha
DC @ Young Adult Money kay at frugalvoices hmmmmmm, point taken! :) Still wouldn’t be much though. :P
I think he made a good call, he’s thinking long term. Anyone who watches/plays sports knows how easy it is to get injured. Why risk the rest of your career for 2%. I’ve turned down a higher paying job before because the hours were madness. In the long run I knew that I would just hate being there all the time. I chose time over money and I haven’t regretted it.
He already recorded 629 outs, putting himself at risk of injury each time. What’s one more, especially when it pays much more than any of the other 629 outs?!
Jover2 It’s a fair question. It may be outside of his “routine” as a starter, but many starters have become relievers and vice versa.
mycareercrusade Yeah that would be nice! But then again, if he’s already not motivated enough to go out for the last out in relief I think he’d figure “I’ll just donate $500k anyway.” Who knows.
manneredmoney Good for you! I also think he made a good decision, but you have to wonder how tiny the chances are that he’d get injured getting one out. It could very well end up being just 1-5 pitches he has to throw.