LOCKOUT! The affects and Solutions For NFL Players

Most fans don’t think about much more of a Football or Basketball season any further in depth than what their teams schedule looks like the coming year. Their most in depth questioning is whether or not the trades their team made will give their team a better chance of reaching the playoffs, or possibly giving them a chance to win it all. The current situation with the NFL lockout and very real possibility of an NBA lockout brings to surface more serious questions for the players. The average fan sees or hears about a player signing multi-million dollar contracts and thinks the player is set! Unfortunately the reality of how a player’s contract actually pays the player isn’t as simple as it would appear to an unknowing fan. To a fan the player get’s $20million in contractual guaranteed money and they think, this guy can afford the loss of income while both sides of the bargaining dogs bark at each other through the fence until they tire and call it a truce.

In reality the player typically doesn’t see all of this money in a lump sum payment. In reality the player’s contract spreads the payments out over a predetermined period of time. For an NFL player they may get paid portions of this money spread out over two or three years. They may receive monies in the form of a “bonus” two or three times per year, plus mix in the rest with their salary During the season. Without a season and without a CBA these players would more than likely not see any of this money until a new CBA (collective bargaining agreement) is reached. Not that the CBA will change their existing contract, but until an agreement is made there is no Season to be paid for. For NBA players the scenario is a little different. They are typically only paid their contractual monies During the season, which leaves them without a paycheck during the offseason.

Regardless, keep in mind two very critical facts that most of us don’t think about and leave out of the equation. These players are more times than not, supporting more than one family. They are supporting, from my experience, at least two or three families and this is a conservative number. Additionally, for the average non household named players, these guys aren’t making the kind of money you hear about the Lebron’s, Koby’s, and Mello’s of the league are making. The average player is making minimum league wages. After you deduct expenses for their Agents, Attorney’s, CPA’s, Taxes, and Mortgage payments, the average professional athlete isn’t making much more than the average person. For the average player, the affects of a lockout is essentially the same as you or me being laid off our job while the bills are still coming each month.

Although this may not be an acceptable excuse to the general public, even the household named players feel the pinch. Although they may see larger paychecks on payday, their lifestyles are reflective of their paychecks. They spend more because they make more! We can’t beat them up too much on this either. Let’s be honest, the norm in today’s society says spend what you have, buy more, acquire more, it’s never enough! The average every day Joe is living outside of their means and the economic numbers which lead to our second recession in ten years is proof of this. So why an athlete should be held to any different standard than the rest of the working class is beyond me? The reality is this, they spend in what is considered “the norm” for us in the same way everyone else does, just on a higher level. The same mind set most people have of, if I made what they made, THEN I would have money to save is exactly that…. A mindset! That’s the tricky thing about money. The way our culture sees money is designed so that no amount is ever enough. There’s always someone with more and bigger and better things, and an athlete’s mindset is no different than any of ours.

Throughout history athletes haven’t been known for their financial savvy ways or as role models when it comes to responsibly managing money. In fact they have been known more to have blown everything they made. Athletes are statistically more prone to bankruptcy than anyone else. I believe the latest numbers state that over 70% of athletes are broke within five years of retirement, with those percentages climbing the further out you go. This brings us to the question of what affects does a Lockout have of them now.

Financial pressure is building for these guys, make no mistake about it. The bills are still coming in and no pay check is following. They are starting to deplete their bank accounts and liquidating their investments. In fact I believe the NFL is counting on this as leverage and just buying their time while the financial pressures build to the point that these guys cave in. When you start to threaten a person’s way of life, their accustomed lifestyle and possessions, good intentions and strong will only go so far. So what are some solutions for the players who want to continue holding out? What can they do to balance this extreme financial situation and threat to their lifestyle?

There are a couple of things I have shared with the athletes I personally help and a few things that I have seen others doing to buy them time until a new CBA is reached.

First, I stress the importance of living on a budget. Budget, Budget, Budget! They need to do this regardless of a lockout or not. This is 101 to avoid becoming another statistic. These guys are self disciplined beyond our belief when it comes to their sport. The reason? It supports their lifestyle! This was their golden ticket, their winning lottery ticket. I tell my guys they have to look at their finances in the same manner, and take
the same approach.

No different than the sacrifices they made to get into the League; they have to make financial sacrifices to get them through life with this gift they have been blessed with.

Additionally, make sure their budget is primarily based off living on interest and dividends alone from their money. (Preferably their entire budget should consist of interest and dividends) Statistically, if you are spending more than 8% of your principal per yr. you will drain your monies before you die. This especially holds true with athletes considering they no longer receive the hefty income they have become accustomed to once they retire from their sport. Get with an advisor who has a proven track record specializing in budgeting for athletes. If you can’t afford it within your budget, Don’t buy it! I always challenge my athletes to also ask themselves before making any purchase, will this make my life complete? How long will this make me happy for? Does it make sense for me after answering those questions?

If the athlete’s budget is in place they won’t have to explore these next options. But here are other options. PAY DAY LOANS. You’ve seen the check cashing or” Advance pay day loans” on nearly every street corner. Well, there are a couple businesses’ that do the same things except on steroids. They do very large “ Advance pay day” loans. In essence the way it works: you apply for a PAY DAY loan until your season is back in order and making money again. The business will look at your contract and “guaranteed” monies owed to the athlete and determine whether or not the loan makes sense for them. Unfortunately I’ve seen more players taking this route than taking their finances seriously. It’s more of a quick fix. They give you money to live off of and pay your bills to support your family, etc. until a new season starts.

Short term your answers are solved. Long term, the athlete has done nothing to place themselves in the best position in order to never deal with this again, considering they haven’t taken any steps to begin a budgeted lifestyle. What has happened is the athlete has only postponed the dreadful outcome of becoming another statistic until after they retire. Out of the few companies I’ve seen who do this; there is one in particular who actually seems to care about the financial future of those they loan to. They require the player to become a client and immediately begin a budgeting system to actually improve the player’s chances of learning a system of financial responsibility . Fortunately these types of “Pay Day on Steroids” companies aren’t on every corner like the smaller versions. The reason this is good is because there would be too many sharks in the tank. Only having a few, a player can genuinely get a grasp on who is offering them the best deal.

Lastly, I’ve seen players taking advances or loans from a line of credit with their Agents or management companies, also with high interest rates attached to the loan. Again, I wouldn’t recommend loans except as a last ditch effort. The real problem isn’t that the player’s don’t have enough money. The real problem is that the player doesn’t know how to manage money when they do have it. If they fix this problem they will avoid ever running into a scenario where they need money. If a player chooses to look at this from the right angle they will see this is actually a blessing in disguise, a wakeup call that most athletes never get, until it’s too late. These guys are experiencing, while they are still playing what it feels like to no longer have a check coming in. Their brothers who fell before them never had the opportunity they currently have. They were retired with no hope of ever receiving another larger check by the time they learned the importance of budgeting.