When it comes to guaranteed money in NFL contracts, there’s a lot of confusion. Every time the news breaks of a big-name player signing a massive deal it’s usually a complicated affair, with word of huge lump sums and tons of contingencies. It seems like it would take a financial advisor to really understand it all, and even then, it might still be a challenge. But here’s the deal. Guaranteed money is the key to understanding an NFL contract.
What exactly is guaranteed money in an NFL contract? Basically it’s the amount of money a player is sure to receive even if he is released or traded during the contract term. This means that a player can count on receiving a certain amount of money regardless of any changes to his on-field performance or off-field behavior. It’s similar to a signing bonus, the previously discussed money received upfront and often included in a contract.
But what’s the difference? Signing bonuses also give players a certain sum of money upfront, however, they come with conditions attached. Usually if a player is released or traded during the contract term, the NFL team has the right to claw back some or all of the bonus money. Via guaranteed money, a player has a little more security as most of the guaranteed money in an NFL contract remain non refundable.
It can be confusing and a lot to take in, but that doesn’t mean you can’t get it. Guarantees also come in different varieties. A fully guaranteed contract guarantees a player’s money for the entire length of the contract, while a partially guaranteed contract gives players a set amount of money that is guaranteed if the player is released or traded inside a certain period of time.
It’s always important to understand the particulars as more or less guaranteed money can make a huge financial difference for the player. Does the amount increase or decrease over time? Is it better the shorter or longer contract? These are all questions you need to ask and understand as a fan trying to make sense of NFL contracts.
To further understand and break down guaranteed money, let’s unpack the recently announced contract between the Dallas Cowboys and star quarterback Dak Prescott. Prescott’s new deal which includes four-years $160 million and roughly $126 million in guaranteed money, makes him the highest-paid player in the NFL. It also illustrates how complicated these big money deals can be.
For starters, the $126 million is just the guaranteed money, but with the help of bonuses Prescott actually receives a much bigger payout. Prescott also made sure to negotiate a “no trade clause” of four years which means the Cowboys are banned from trading him for a set period of time which adds protection for the QB despite any changes within the team.
However, it’s important to understand that Prescott’s four-year deal is back-loaded and his actual salary decreases over time. This is not normal for star quarterbacks, however, it does provide more flexibility to the Cowboys when it comes to managing the salary cap. So while there is a still a large guarantee, Prescott’s total salary decreased four-years in.
This is just one example of the complex guarantees that exist in the NFL. Every contract is unique and different, and every team or player will have different needs and wants. That’s why it’s always crucial to understand where and how the money is being guaranteed to the player like if it covers just a matter of months or the entire contract or how it changes over time.
But even after all my research, it can still be hard to wrap my head around how the money works. What helps is visualizing the money like it is a personal paycheck, with different parts having different conditions or lengths. For example, one part might look like a signing bonus and be nonrefundable while the other part might be fully refundable but only last one year.
Understanding how guaranteed money works in big NFL contracts can be tricky. Does the money stay regardless of trades or field performance? Is it multiple payments or a single lump sum? These are all questions to understanding a contract, but it helps to think of it like an everyday paycheck. It clears up some of theprevailingconflicts and points out the discrepancies from contract to contract.
Essentially, understanding the amount of guaranteed money and the conditions attached to it is the key to understanding NFL contracts. It doesn’t matter if you’re a fan, a journalist or an NFL accountant, taking the time to understand legally how the money works in these contracts will help you make sense of the process.