The players and owners haven't made any progress toward a new collective bargaining agreement and the general consensus is that this will be a lengthy lockout. However, there are many who believe that the players will budge when their paychecks don't arrive in November.
Noah Sheer - the Director of the Sports and Entertainment division at Cherry, Bekaert & Holland - provides financial services to many professional athletes, actors and musicians. Sheer has many NBA clients, but felt that the majority of players weren't changing their habits in the months leading up to the lockout.
"Players are not preparing," Sheer said in December. "You can lead a horse to water, but you can't make it drink."
Now, he believes that players will be in for a rude awakening if a portion of the season is lost.
"In the NBA, players are going to feel the pain on November 15," Sheer said. "Spending is fine right now, but many players live paycheck to paycheck and that's when they'll be affected. I'm not the first one to say this, but players have to be preparing for when the paychecks stop showing up."
"This is a situation everyone hoped to avoid," he added. "We have prepared our clients for this possibility and will do all we can to be with them in the challenging time ahead. The state of the worldwide economy touches everyone. Solid financial and tax planning is even more critical for success in these times. Taxes are the largest expense, bar none. Federal and state income, real estate, sales, excise, foreign income taxes all must be scrutinized and planned. This is our forte and often overlooked by many athletes."
Professional athletes are expected to maintain a certain lifestyle, which is why many have such a difficult time saving money and preparing for situations like a lockout.
"The problem with a lot of athletes is that they've learned to live out of their means," Sheer said. "They become so accustomed to a certain lifestyle - being able to spend $100,000 over the course of a few months, which is something the average person just can't do. When they need money, they're asking for enormous loans to maintain that lifestyle. It doesn't make much sense for players to take these loans, but they feel like it's their only option because nobody wants to be seen without any money during the lockout."
However, if players are low on money, Sheer says that they have several options.
Because most players are still under contract, they will be able to take out loans, but they must be careful. Sheer advises his clients not to accept loans from hard money lenders. Instead, he says that a number of banks are willing to work with NBA and NFL athletes during the lockouts.
"There are a lot of hard money lenders out there that are willing to loan at ridiculous interest rates with points on top, but you come out paying upwards of 20 to 40 percent to borrow the money," Sheer said. "There are better ways to find money. A lot of players think that's their only option, but that's not the case. There are a lot of banks that are talking with players in the NBA and NFL. One, in particular, is SunTrust. They're doing a great job and if these players want to get serious, banks like SunTrust will get serious too and help them through this lockout."
Another option for players is to revisit their tax returns and receive money that they previously missed out on.
"A lot of players aren't involved in the preparation of their tax returns. With the amount of money that these players are receiving, they're paying a lot in taxes and they should be getting large refunds. If a player isn't getting a large refund, it's because he's not involved in his accounting, bookkeeping and tax preparation. If their accountant doesn't know who they are, they don't know what expenses you've had in the past year that relate to them being a professional athlete. You can amend your prior tax returns and, more often than not, you will get money back. Some guys went from owing money to receiving nearly $10,000 in tax refund. That's their money - it's just a matter of going back and looking over the expenses that relate to being a professional athlete."
Sheer advises his clients to do something productive with their free time during this lockout. He believes that players should be going back to school, training on a rigorous program or finding other ways to make money such as camps and appearances.
If the entire season is lost, Sheer believes that a lot of players will be in trouble.
"Living off of debt is not a good situation," he said. "A lot of players will find themselves in a bad position because they'll be living off of other people's money. That's a high cost of living."
Many NFL players have come crawling to Sheer's firm, completely broke and out of answers. NBA players must prepare for the worst if they want to avoid a similar fate.
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