My former Marketing professor used to say: "It's simple to be successful in business. Just find out what people want, and give it to them." He was right, but a lot of musicians (myself included) aren't generally inclined to follow that advice. We tend to look down on artists who pander to popular demand as being "sell-outs". Besides, popular music trends are notoriously unpredictable and most of us have a hard time molding ourselves to fit constantly changing music fads anyway.
Unfortunately for us, the free market doesn't care about artistic integrity. It's fine to be romantic and idealistic in your songwriting, but don't try to carry that mentality over into the business side of things or you will surely get burned. Capitalist free market economics always boils down to the very simple concept of supply vs. demand. If you want to know how any venture is going to work out, all you have to do is realistically figure how much supply there will be relative to demand for that product or service. It is really that simple. It's not about corporate conspiracies or lack of government support for the arts. As long as markets are truly free and competitive, it just comes down to supply and demand. That's why dealers of unpopular automobiles go bankrupt, while salesmen for the most popular models don't even bother to negotiate or return phone calls. They know that they have a hot product. All they have to do is sit back and the customers will come to them.
So what lessons should the independent musician draw from this? Well, for starters, I think we can all benefit from being realistic about supply and demand for our own services. If you're not already a superstar, then you're probably not in a position to sit back and wait for the customers to come to you. I'm a jazz musician, a service for which there is absurdly small demand! I try to do what I can to spread the word about gigs, but I have limited means to generate more demand. There continues to be an ample supply of good jazz musicians in my local market, though prospects are better for those who achieve the skill level necessary to ascend into the less crowded elite jazz musician market. Ultimately I realize that I have chosen a professional field in which the supply/demand equation is stacked against me, and I know that I am lucky to be working at all! If money were my main motivation, I'd probably be selling iPhones instead of jazz music.
Friday, July 3, 2009
Friday, June 26, 2009
Estate of Denial
Nobody likes to dwell on thoughts of mortality, especially young musicians who are just trying to get established in the world. However, the recent untimely passing of artists like Michael Jackson and his longtime guitarist, David Williams, should remind us all of the importance of basic estate planning.
You might be thinking "I don't have any assets to worry about, so why does it matter if I die without a will?". It matters because somebody will have to deal with your estate (no matter how small) when you die, and probably one of your close relatives will get charged with the task. Do you really want to subject your family to the trouble of sorting out your financial affairs, on top of the grief they will undoubtedly already be dealing with? Besides, I'll bet you have at least one thing that you would like to leave specifically to a particular person, even if it's just an old family photo album or a cherished instrument.
Unfortunately, it can be somewhat costly to hire an attorney to create estate documents for you, but that is the surest way to get the job done properly in compliance with your state and local laws. If you own substantial assets like a house, have multiple dependents, or an otherwise complicated estate, I would really recommend that you spend a few hundred dollars and hire an attorney to create your documents.
On the other hand, if you are a typical young, single, musician with a simple estate, it might be adequate to use some inexpensive software or self-help books for creating basic estate documents. Here are a few links to check out:
Make Your Own Living Trust
Quicken Willmaker
Suze Orman's Will and Trust Kit
The basic documents most often recommended for estate planning are wills, living trusts, and living wills. A will is your official statement designating the person you want to take charge of your estate distribution and how you want your assets handled upon your death. Dying intestate (without a will) usually leads to the state taking charge and might result in long delays or in your assets being distributed in some way that you didn't intend. Requirements for wills vary in different jurisdictions, and often even properly written wills must go through official probate hearings in court before assets can be distributed. A living trust is basically a way of transferring property without having to go through court probate hearings. It is useful to enable quick transfer of assets after your death. A living will or health care directive is a document that specifies your desires about life-prolonging medical treatments in the event that you become incapacitated and unable to speak for yourself.
It's also a good idea to speak with your heirs and put in writing your wishes regarding funeral arrangements, any people who should be notified of your death, what they should do with your pets, etc. The more openly you discuss this stuff now, the easier it will be for them when you are gone. And I hope that's a long, long time from now. But I recommend that you start the discussion now.
You might be thinking "I don't have any assets to worry about, so why does it matter if I die without a will?". It matters because somebody will have to deal with your estate (no matter how small) when you die, and probably one of your close relatives will get charged with the task. Do you really want to subject your family to the trouble of sorting out your financial affairs, on top of the grief they will undoubtedly already be dealing with? Besides, I'll bet you have at least one thing that you would like to leave specifically to a particular person, even if it's just an old family photo album or a cherished instrument.
Unfortunately, it can be somewhat costly to hire an attorney to create estate documents for you, but that is the surest way to get the job done properly in compliance with your state and local laws. If you own substantial assets like a house, have multiple dependents, or an otherwise complicated estate, I would really recommend that you spend a few hundred dollars and hire an attorney to create your documents.
On the other hand, if you are a typical young, single, musician with a simple estate, it might be adequate to use some inexpensive software or self-help books for creating basic estate documents. Here are a few links to check out:
Make Your Own Living Trust
Quicken Willmaker
Suze Orman's Will and Trust Kit
The basic documents most often recommended for estate planning are wills, living trusts, and living wills. A will is your official statement designating the person you want to take charge of your estate distribution and how you want your assets handled upon your death. Dying intestate (without a will) usually leads to the state taking charge and might result in long delays or in your assets being distributed in some way that you didn't intend. Requirements for wills vary in different jurisdictions, and often even properly written wills must go through official probate hearings in court before assets can be distributed. A living trust is basically a way of transferring property without having to go through court probate hearings. It is useful to enable quick transfer of assets after your death. A living will or health care directive is a document that specifies your desires about life-prolonging medical treatments in the event that you become incapacitated and unable to speak for yourself.
It's also a good idea to speak with your heirs and put in writing your wishes regarding funeral arrangements, any people who should be notified of your death, what they should do with your pets, etc. The more openly you discuss this stuff now, the easier it will be for them when you are gone. And I hope that's a long, long time from now. But I recommend that you start the discussion now.
Friday, June 19, 2009
Hold the Sauce
Up-selling is the practice of trying to persuade a consumer to purchase a more expensive product, or additional related products and services. Salespeople are routinely trained to up-sell you into more than you bargained for because that is how a lot of retail businesses make most of their profits. It's also how you wind up spending more than you should, so stick to your guns and say "no thank you" to these types of up-selling scenarios:
1. When you purchase musical instruments, cars, or consumer electronics, you will almost invariably be offered an extended warranty at the time of purchase. I routinely turn down these warranties because a) I intend to take good care of my stuff, b) the things they are offering to cover may already be covered under the manufacturer's warranty or my own homeowner's/renter's insurance, and c) even if I do need additional warranty coverage, I can almost always find a better warranty deal from a third party rather than getting it directly from the seller of the product.
2. "Do you want fries with that?" "Would you like to try the special (for which no price is listed on the menu)?" "You can super-size it for only 45 cents extra." No thank you. No thank you. No thank you. The meal I ordered is really all I want. Ordering more is not only going to cost extra, it's going to make me overeat and feel uncomfortable.
3. Banks and other financial institutions may try to up-sell you into credit monitoring services, unemployment bill-paying insurance, overdraft protection, and all sorts of other costly extra services. Don't agree to these things unless you really read the fine print and conclude that it's a good deal and something that you really need.
4. Any kind of monthly recurring fee for a service that you are unlikely to use very much is probably a bad deal, even if the monthly amount sounds trivial. Your cell phone provider might offer you the ability to use your phone overseas for only $5 a month, but if you don't travel abroad very often, that basically amounts to throwing away $60 per year. And besides, the calling rates you pay will probably be high even if you do use the service.
All of these up-selling tactics only work on people who don't know what they want. As always, do a little homework in advance and you won't be vulnerable to such tricks.
1. When you purchase musical instruments, cars, or consumer electronics, you will almost invariably be offered an extended warranty at the time of purchase. I routinely turn down these warranties because a) I intend to take good care of my stuff, b) the things they are offering to cover may already be covered under the manufacturer's warranty or my own homeowner's/renter's insurance, and c) even if I do need additional warranty coverage, I can almost always find a better warranty deal from a third party rather than getting it directly from the seller of the product.
2. "Do you want fries with that?" "Would you like to try the special (for which no price is listed on the menu)?" "You can super-size it for only 45 cents extra." No thank you. No thank you. No thank you. The meal I ordered is really all I want. Ordering more is not only going to cost extra, it's going to make me overeat and feel uncomfortable.
3. Banks and other financial institutions may try to up-sell you into credit monitoring services, unemployment bill-paying insurance, overdraft protection, and all sorts of other costly extra services. Don't agree to these things unless you really read the fine print and conclude that it's a good deal and something that you really need.
4. Any kind of monthly recurring fee for a service that you are unlikely to use very much is probably a bad deal, even if the monthly amount sounds trivial. Your cell phone provider might offer you the ability to use your phone overseas for only $5 a month, but if you don't travel abroad very often, that basically amounts to throwing away $60 per year. And besides, the calling rates you pay will probably be high even if you do use the service.
All of these up-selling tactics only work on people who don't know what they want. As always, do a little homework in advance and you won't be vulnerable to such tricks.
Friday, June 12, 2009
The Monthly Trap
How much is your monthly car payment? I'll bet you know the exact amount right off the top of your head. How much do you still owe on your car loan? I'll bet you don't know! Which is the more important amount of the two? That depends on your perspective. For the sake of getting through the next month without having your car repossessed, the monthly payment may be your immediate concern. But for the sake of your long-term financial health, total debt should be your primary focus.
Don't ever fall into the trap of thinking in terms of "how much I can afford per month". Thinking that way only ensures that you will never get off of the perpetual debt slavery treadmill. Sellers of big-ticket items like cars, appliances, houses, cosmetic surgery, etc. love to pitch their products in terms of monthly payments, because it makes them seem affordable. But ultimately, you will have to pay the total cost of that item, plus whatever interest they are charging on your loan, so you're better off just facing right up to that bottom line price from the beginning.
It might not always be possible to avoid taking out a loan for certain purchases. If you're a performing musician, for example, you probably really do need to have a car, and sometimes it just might not be possible to get one without borrowing. Also, some kinds of debt, for items like real estate or education, may sometimes prove to be good investments for your future. So I'm not 100% opposed to all debt. But I am about 98% opposed to debt! In fact, I hate debt so much that I personally haven't had any outstanding loans since 1994. I just face up to the total cost of whatever it is that I want to buy, and if it's too much for me to pay in full, up front, then that means I can't afford it. That's really the bottom line.
Living debt free allows you to sleep better at night. It shrinks your monthly bills down to a size that is easier to keep up with, freeing more of your time for personal and creative pursuits. And it opens up the possibility that one day, if you save and invest and continue to stay out of debt, you might actually achieve true financial independence and not have to work at all! The alternative is to keep taking out loans and struggling to make minimum monthly payments, forever living under the shadow of your debt overlord!
One exception that I make in my staunchly anti-debt personal financial strategy is the use of credit cards as a convenient method of interest free payment. It is very important to point out here that credit card debt is one of the worst, highest interest forms of consumer debt. However, in the U.S., credit card companies are required to allow an interest free grace period for prompt payment in full every month. As long as you always pay off your total credit card bill within the grace period, you will pay no interest and benefit from the convenience of using a card to pay. And you will also be building a good credit history. For those who lack the discipline to restrain spending and always pay the full bill within the grace period, please ignore the preceding suggestion and cut up those cards instead! Debt sucks. Monthly payments are the tempting sirens that entice you into debt hell. Don't fall for it.
Don't ever fall into the trap of thinking in terms of "how much I can afford per month". Thinking that way only ensures that you will never get off of the perpetual debt slavery treadmill. Sellers of big-ticket items like cars, appliances, houses, cosmetic surgery, etc. love to pitch their products in terms of monthly payments, because it makes them seem affordable. But ultimately, you will have to pay the total cost of that item, plus whatever interest they are charging on your loan, so you're better off just facing right up to that bottom line price from the beginning.
It might not always be possible to avoid taking out a loan for certain purchases. If you're a performing musician, for example, you probably really do need to have a car, and sometimes it just might not be possible to get one without borrowing. Also, some kinds of debt, for items like real estate or education, may sometimes prove to be good investments for your future. So I'm not 100% opposed to all debt. But I am about 98% opposed to debt! In fact, I hate debt so much that I personally haven't had any outstanding loans since 1994. I just face up to the total cost of whatever it is that I want to buy, and if it's too much for me to pay in full, up front, then that means I can't afford it. That's really the bottom line.
Living debt free allows you to sleep better at night. It shrinks your monthly bills down to a size that is easier to keep up with, freeing more of your time for personal and creative pursuits. And it opens up the possibility that one day, if you save and invest and continue to stay out of debt, you might actually achieve true financial independence and not have to work at all! The alternative is to keep taking out loans and struggling to make minimum monthly payments, forever living under the shadow of your debt overlord!
One exception that I make in my staunchly anti-debt personal financial strategy is the use of credit cards as a convenient method of interest free payment. It is very important to point out here that credit card debt is one of the worst, highest interest forms of consumer debt. However, in the U.S., credit card companies are required to allow an interest free grace period for prompt payment in full every month. As long as you always pay off your total credit card bill within the grace period, you will pay no interest and benefit from the convenience of using a card to pay. And you will also be building a good credit history. For those who lack the discipline to restrain spending and always pay the full bill within the grace period, please ignore the preceding suggestion and cut up those cards instead! Debt sucks. Monthly payments are the tempting sirens that entice you into debt hell. Don't fall for it.
Friday, June 5, 2009
Lowest Price Doesn't Necessarily Equal Best Deal
Regular readers of this blog know that keeping costs low lies at the heart of my financial philosophy. If there is a way to save a nickel on something, I will invariably find it. And while I still firmly believe that low living expenses are the key to financial success, I don't always advocate going for the rock bottom price on every purchase. Instead, for the sake of minimizing long-term expenses, I would suggest that thorough knowledge is essential to finding the best value among products or services.
Your local dollar store is full of examples of what I'm talking about. Have you ever purchased a $1 pair of headphones? That is certainly the lowest possible price, but there's no value in that purchase. Once you hear how they sound (if they produce any sound at all), you will realize that you haven't saved any money -- you've just thrown away a dollar! I don't mean to pick on dollar stores, actually I shop for lots of little items there, but only when I know that the quality is comparable and the price reliably lower than at other retailers.
When comparison shopping, it is very common to find that the cheapest available product is of considerably inferior quality. I suspect that we have all experienced this frustration of buying the cheapest item, only to immediately discover that it won't do. Then you have to go out to buy another one again, and you also waste more time shopping when you could have been home writing a song.
A lot of people go for the lowest priced junky product or service simply because they are too broke to afford the better one that will actually last and get the job done properly. If you're in that position, then you probably shouldn't be shopping at all, you should be saving up and researching the market until you can afford something worth buying.
Don't get me wrong. I'm not encouraging you to go on a first-class spending spree. In fact, there are many cases where the cheapest option is actually just as good as the most expensive option. Gasoline is a good example. There is virtually no difference in quality between the most expensive brand name gas and no-name discount gas, despite what some TV commercials might suggest. But you need to do a little research to find these things out. And once you are armed with knowledge of the market for a given product or service, you will also be able to negotiate for it with greater confidence.
Your local dollar store is full of examples of what I'm talking about. Have you ever purchased a $1 pair of headphones? That is certainly the lowest possible price, but there's no value in that purchase. Once you hear how they sound (if they produce any sound at all), you will realize that you haven't saved any money -- you've just thrown away a dollar! I don't mean to pick on dollar stores, actually I shop for lots of little items there, but only when I know that the quality is comparable and the price reliably lower than at other retailers.
When comparison shopping, it is very common to find that the cheapest available product is of considerably inferior quality. I suspect that we have all experienced this frustration of buying the cheapest item, only to immediately discover that it won't do. Then you have to go out to buy another one again, and you also waste more time shopping when you could have been home writing a song.
A lot of people go for the lowest priced junky product or service simply because they are too broke to afford the better one that will actually last and get the job done properly. If you're in that position, then you probably shouldn't be shopping at all, you should be saving up and researching the market until you can afford something worth buying.
Don't get me wrong. I'm not encouraging you to go on a first-class spending spree. In fact, there are many cases where the cheapest option is actually just as good as the most expensive option. Gasoline is a good example. There is virtually no difference in quality between the most expensive brand name gas and no-name discount gas, despite what some TV commercials might suggest. But you need to do a little research to find these things out. And once you are armed with knowledge of the market for a given product or service, you will also be able to negotiate for it with greater confidence.
Friday, May 29, 2009
Patience Shall Be Rewarded
There is nothing costlier than instant gratification. Once in a while, you might get lucky and have a killer deal fall in your lap just when you need it, but generally speaking, whenever you go for the quick and easy option, you're probably getting ripped off. There is now a gourmet coffee shop on every corner in most cities, but it's the most expensive way to get your java. Buying concert tickets online and having them mailed to you could cost up to $30 in extra "convenience charges" versus going directly to the venue box office to purchase them. The local pizza shop gladly offers "free delivery", but you will pay full price for that pie, and you'll have to tip the delivery guy, too.
Those are just a few trivial examples of what I'm talking about. I come from a long line of serious bargain hunters, and we can be as patient as a spider in its web, just waiting to pounce when the right opportunity comes along. Eew! Sorry, that's a creepy analogy when I read it back! But hopefully, you get my point. I'll give you a couple more examples.
Last year, I decided to buy myself a really nice keyboard and get serious about playing piano. However, being a full time bassist, I couldn't really justify the $3500 cost of a state-of-the-art new keyboard. Rather than settle for a mediocre new instrument in my price range, I just started scanning the classifieds for a bargain on a great used one. And scanning.....and scanning....and scanning some more. Real bargains don't come along every day, but I had decided on my budget (between $500-$1000), and I was willing to wait. Finally, after a few months of searching, I found exactly the keyboard that I wanted, in excellent condition, for only $800. I already had the cash on hand, and I scooped it up on the same day the ad was posted. Cha-ching! That's $2700 I saved right there.
I have lots of friends who go to new car dealers to trade in their old vehicle and pick up a new car with "no hassle, no haggle". That is the quick and easy way to buy a car. It is also the sucker's way! A dealer will be happy to make your experience quick and painless, as long as he is giving you a lowball price for your trade-in, getting the maximum price for the new car, and probably shaking you down on the financing deal as well. No matter what kind of car you're looking at, you could save thousands of dollars, often $10,000 or more, by holding out for a bargain on a good used, low mileage vehicle of the same model. But you must be willing to wait, wait, wait, and scan, scan, scan. And also be willing to walk away from a lot of deals before finding your bargain.
Be careful not to get stuck in an emergency situation where you must buy that car today because you waited until your old car died on you, or you have to run to the overpriced local music store right before your gig, because you have completely run out of drumsticks. Without a little advance planning, you won't be in a position to hold out for bargains, so plan ahead for purchases. Then sit back and wait for the opportunities to come along.
Those are just a few trivial examples of what I'm talking about. I come from a long line of serious bargain hunters, and we can be as patient as a spider in its web, just waiting to pounce when the right opportunity comes along. Eew! Sorry, that's a creepy analogy when I read it back! But hopefully, you get my point. I'll give you a couple more examples.
Last year, I decided to buy myself a really nice keyboard and get serious about playing piano. However, being a full time bassist, I couldn't really justify the $3500 cost of a state-of-the-art new keyboard. Rather than settle for a mediocre new instrument in my price range, I just started scanning the classifieds for a bargain on a great used one. And scanning.....and scanning....and scanning some more. Real bargains don't come along every day, but I had decided on my budget (between $500-$1000), and I was willing to wait. Finally, after a few months of searching, I found exactly the keyboard that I wanted, in excellent condition, for only $800. I already had the cash on hand, and I scooped it up on the same day the ad was posted. Cha-ching! That's $2700 I saved right there.
I have lots of friends who go to new car dealers to trade in their old vehicle and pick up a new car with "no hassle, no haggle". That is the quick and easy way to buy a car. It is also the sucker's way! A dealer will be happy to make your experience quick and painless, as long as he is giving you a lowball price for your trade-in, getting the maximum price for the new car, and probably shaking you down on the financing deal as well. No matter what kind of car you're looking at, you could save thousands of dollars, often $10,000 or more, by holding out for a bargain on a good used, low mileage vehicle of the same model. But you must be willing to wait, wait, wait, and scan, scan, scan. And also be willing to walk away from a lot of deals before finding your bargain.
Be careful not to get stuck in an emergency situation where you must buy that car today because you waited until your old car died on you, or you have to run to the overpriced local music store right before your gig, because you have completely run out of drumsticks. Without a little advance planning, you won't be in a position to hold out for bargains, so plan ahead for purchases. Then sit back and wait for the opportunities to come along.
Friday, May 22, 2009
More Miscellaneous Money Saving Tips
Learn to Cook. I mean really cook great food. This may require a modest initial investment in some kitchen appliances, cookbooks, spices, and such, but it will save you a bundle in the long run if you have been eating out just because you're so sick of making macaroni and cheese. More importantly, learning to cook really fine meals is guaranteed to significantly improve your quality of life, and probably your health, too. It does take some time to prepare a good meal, but you can always make extra portions and eat the leftovers for several days. Yummy!
Periodically comparison shop for insurance. My health insurance premium went up 139% in the last 3 years! At the time I signed up for that policy, it was the best deal around. Fortunately, I'm still healthy as a horse, so I checked around and found a much better deal with another company that will save me hundreds of dollars per year without sacrificing quality of coverage. If you have serious pre-existing conditions or recent health problems, you might possibly be stuck with your current insurer, but you can and should occasionally compare deals on car insurance, rent insurance, etc. to make sure you are still getting the best deal available.
Take care of yourself! Do I even need to tell you that smoking, drinking, using drugs and lack of exercise are costly? I don't know anyone who can really afford to develop health problems these days, but we musicians especially need to improve our odds by staying fit. As with cooking, getting in shape will also yield quality of life benefits and probably improved musical performance.
Sometimes procrastination pays. In most cases, putting things off only causes bigger problems and costs you additional money, but not always. For example, the longer you can postpone doing laundry, getting the car washed, or getting a haircut, the longer it will be before you need to have it done again, right? Of course, taking this advice to the extreme would lead to bad hygiene! But the same principle also applies to getting a new car or a new guitar, so it's something to consider.
Ask for a better deal. Many Americans tend to accept whatever price they are quoted without question, when in fact most product and service fees are subject to some price negotiation. If your credit card company suddenly jacks up your interest rate, call and ask them to lower it. The worst thing that can happen is that they will say no, but it doesn't hurt to ask.
Periodically comparison shop for insurance. My health insurance premium went up 139% in the last 3 years! At the time I signed up for that policy, it was the best deal around. Fortunately, I'm still healthy as a horse, so I checked around and found a much better deal with another company that will save me hundreds of dollars per year without sacrificing quality of coverage. If you have serious pre-existing conditions or recent health problems, you might possibly be stuck with your current insurer, but you can and should occasionally compare deals on car insurance, rent insurance, etc. to make sure you are still getting the best deal available.
Take care of yourself! Do I even need to tell you that smoking, drinking, using drugs and lack of exercise are costly? I don't know anyone who can really afford to develop health problems these days, but we musicians especially need to improve our odds by staying fit. As with cooking, getting in shape will also yield quality of life benefits and probably improved musical performance.
Sometimes procrastination pays. In most cases, putting things off only causes bigger problems and costs you additional money, but not always. For example, the longer you can postpone doing laundry, getting the car washed, or getting a haircut, the longer it will be before you need to have it done again, right? Of course, taking this advice to the extreme would lead to bad hygiene! But the same principle also applies to getting a new car or a new guitar, so it's something to consider.
Ask for a better deal. Many Americans tend to accept whatever price they are quoted without question, when in fact most product and service fees are subject to some price negotiation. If your credit card company suddenly jacks up your interest rate, call and ask them to lower it. The worst thing that can happen is that they will say no, but it doesn't hurt to ask.
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