I forgot something. For the past several months, I have been biting my lip, resisting the temptation to go off on tangents and dilute the potential usefulness of the information in this blog. Of course, personal finance is a huge topic, and my humble blog is only intended to be a starting point for you, a basic introduction.
But amidst all the recent economic turmoil and insecurity, I have rediscovered something that I think is worth mentioning. There is always opportunity. All around you. In countless forms. And not just for established tycoons and lottery winners, but for you and for anybody else who has the creative vision and guts to go for it. Almost every country in the world now operates as a free market; indeed everything our society has amounted to came about through entrepreneurial risk taking.
Yes, it's a scary time to be adrift in turbulent economic currents. Yes, it's a scary time to be passively invested, or to be passively employed, hoping that your gig doesn't end abruptly. But there are winners in every economic cycle, even during major downturns. Instead of passively going along with "business as usual", try looking for an unmet demand that you can serve.
For example, during the Great Depression of the 1930's, record sales and small-combo work declined dramatically, but in response to the public's desire to escape from their hardship through recreation, many musicians adapted by commercializing their music, and the swing dance craze took off.
I have heard that fast food restaurants are doing very well these days, as an affordable (if not very healthy!) alternative to sit-down restaurants. A friend of mine runs a solar power company, and he's busier than ever now, as governments and businesses are virtually throwing money at alternative-energy sources.
Open your mind to the possibilities. Very often, economic downturns are a great time to start a business, due to lowered entry costs and decreased competition. Instead of squirreling money away in a 0.1% interest savings account out of fear, you could be taking charge of your own future and earning great returns if you identify an opportunity and put in the work to make it happen. Especially if you are young and have time to build your dream business, investing in yourself might be the best possible investment you can make.
Friday, July 16, 2010
Thursday, November 12, 2009
Windfalls
It can happen. Perhaps at some point you will get a big advance on a recording contract. Or maybe you'll inherit a pile of money from a rich uncle. Or you might score a lucrative touring gig with a major act for a few months. (I won't propose the lottery-winning scenario because I know you're smart enough to realize that buying lottery tickets is a total waste of money). For a lot of musicians, such a situation might be the first time to ever see a bank balance over 4 figures. Even a sum in the low 5 figures range might seem like an inexhaustible fortune to many people.
Of course, NO fortune is inexhaustible, and if you've never experienced handling very much money before, then I'm sorry, but you're even more likely to blow your lucky break. If you find yourself suddenly in possession of a large, unexpected sum of money, STOP! Don't run off on a binge just yet. The first thing you'll need to do is consult your tax preparer about your tax liability, which might take a bigger chunk than you would have guessed. Obviously, that portion of the money has to be set aside right away, unless you want to go to jail next year. The next best use for a windfall would probably be to pay off high-interest debt, if you have any.
Paying debt and taxes? That's no fun!!! Okay, it's understandable to want to splurge a bit, so I'll suggest blowing 10% of your new treasure on goodies: a vacation, a guitar, a gift for your parents, whatever you want.
At this point, the rest of the windfall should be thought of as somebody else's money. A typical musical career is characterized by lots of lean periods, interspersed with a few prosperous seasons (if you're lucky). Therefore, you should view this windfall as a head start on your long-term investment plan, and steward that money as though it belongs to someone else. Above all, don't assume that this level of income will continue into the future! The worst mistake you can make is to leverage your small fortune into a bigger debt. Music history is littered with the carcasses of bands who used their first record advance to sign up for million dollar home mortgages, only to be dropped by their record company within a short time, and foreclosed on shortly thereafter.
Only getting to indulge yourself in $10,000 out of a $100,000 windfall might seem like a raw deal, but think of it this way: If I offered you $10,000 for free, would you take it? Of course you would! Would you be happy about it? Of course you would! So just pretend that $10,000 was the entire windfall amount. Wisely investing the rest of the money will serve you much better in the long run than spending it now.
Of course, NO fortune is inexhaustible, and if you've never experienced handling very much money before, then I'm sorry, but you're even more likely to blow your lucky break. If you find yourself suddenly in possession of a large, unexpected sum of money, STOP! Don't run off on a binge just yet. The first thing you'll need to do is consult your tax preparer about your tax liability, which might take a bigger chunk than you would have guessed. Obviously, that portion of the money has to be set aside right away, unless you want to go to jail next year. The next best use for a windfall would probably be to pay off high-interest debt, if you have any.
Paying debt and taxes? That's no fun!!! Okay, it's understandable to want to splurge a bit, so I'll suggest blowing 10% of your new treasure on goodies: a vacation, a guitar, a gift for your parents, whatever you want.
At this point, the rest of the windfall should be thought of as somebody else's money. A typical musical career is characterized by lots of lean periods, interspersed with a few prosperous seasons (if you're lucky). Therefore, you should view this windfall as a head start on your long-term investment plan, and steward that money as though it belongs to someone else. Above all, don't assume that this level of income will continue into the future! The worst mistake you can make is to leverage your small fortune into a bigger debt. Music history is littered with the carcasses of bands who used their first record advance to sign up for million dollar home mortgages, only to be dropped by their record company within a short time, and foreclosed on shortly thereafter.
Only getting to indulge yourself in $10,000 out of a $100,000 windfall might seem like a raw deal, but think of it this way: If I offered you $10,000 for free, would you take it? Of course you would! Would you be happy about it? Of course you would! So just pretend that $10,000 was the entire windfall amount. Wisely investing the rest of the money will serve you much better in the long run than spending it now.
Monday, November 2, 2009
Small Steps
Hello world, how have you been? I apologize for going AWOL the past couple of months. I've been working on some new projects, including co-teaching a music business class at L.A. Music Academy with my old friend, Chris Juergensen. Once again, Chris has set a great example and inspired me to redouble my own self-promotional efforts.
When I first decided to release a solo album, Chris told me that selling it wouldn't be too difficult. All I would have to do is commit to spending an hour a day working on promotion. Sounds easy, I thought. Naturally, when the CD first came out, I was filled with enthusiasm and made a respectable initial promotional push. But after a few months, my attention drifted and the salesman in me started slacking off. CD sales reflected my efforts, and I realized that this promotional stuff would require the same kind of long-term commitment that I have for playing my instrument.
I think most of the important things in life are that way, actually. Whether it's the pursuit of art, money, relationships, social reform, health, etc., all that anybody can do in one day is take a very small step forward. Neil Armstrong's first footprint on the moon really wasn't a giant leap. It was just the finish line at the end of a very long trail of small, incremental steps that led us there. There are no giant leaps, only small daily steps. And life is short, so if you want to cover some real ground, you can't afford to miss many days.
Here's an example you can probably relate to. If you practice a musical instrument for one hour per day, six days per week without fail for 40 years, that will still only amount to about 12,500 hours of total practice time over the course of a career. Not bad, but supposing you miss a day here and there? Or get busy with a day job and can't practice at all for several months? In fact, an hour a day is a pretty big commitment to make in the long run, and a lifetime's effort can easily be whittled down to very little progress if the commitment isn't really maintained.
Of course, priorities do change along the way, and we all have to choose between competing goals in our lives. But for the moment, I'm recommitting to direct more of my own small steps toward music promotion. Where are your steps heading?
When I first decided to release a solo album, Chris told me that selling it wouldn't be too difficult. All I would have to do is commit to spending an hour a day working on promotion. Sounds easy, I thought. Naturally, when the CD first came out, I was filled with enthusiasm and made a respectable initial promotional push. But after a few months, my attention drifted and the salesman in me started slacking off. CD sales reflected my efforts, and I realized that this promotional stuff would require the same kind of long-term commitment that I have for playing my instrument.
I think most of the important things in life are that way, actually. Whether it's the pursuit of art, money, relationships, social reform, health, etc., all that anybody can do in one day is take a very small step forward. Neil Armstrong's first footprint on the moon really wasn't a giant leap. It was just the finish line at the end of a very long trail of small, incremental steps that led us there. There are no giant leaps, only small daily steps. And life is short, so if you want to cover some real ground, you can't afford to miss many days.
Here's an example you can probably relate to. If you practice a musical instrument for one hour per day, six days per week without fail for 40 years, that will still only amount to about 12,500 hours of total practice time over the course of a career. Not bad, but supposing you miss a day here and there? Or get busy with a day job and can't practice at all for several months? In fact, an hour a day is a pretty big commitment to make in the long run, and a lifetime's effort can easily be whittled down to very little progress if the commitment isn't really maintained.
Of course, priorities do change along the way, and we all have to choose between competing goals in our lives. But for the moment, I'm recommitting to direct more of my own small steps toward music promotion. Where are your steps heading?
Friday, July 10, 2009
A Few Lessons Learned
Well, I've been preaching here weekly for a year at this point, and by now, I think you probably have a pretty good idea about my basic philosophy on financial matters. This blog was intended to be just a simple primer on personal finance for musicians, and going into much greater depth would defeat that purpose. Besides, I think I'm beginning to repeat myself. Besides, I think I'm beginning to repeat myself. From here on out, I'll be posting only when inspiration strikes or I stumble upon some exciting new financial insight. But for now, let me leave you with a few thoughts to chew on.
1. Stability = Prosperity
Also known as "a bird in hand is better than two in the bush". Most of my musician friends who suffer from financial trouble also have unstable gig situations. As I've mentioned before, it's tempting to drop your steady local gigs whenever a short-term, high dollar gig comes along, but that quick windfall might be followed by an extended period of NO income. You can do well by sticking with the steady work you already have and building upon that.
2. Don't Excuse Yourself
I constantly have to remind myself that I am fully, solely responsible for my own career. I know that I can't be all things to all people. I can't be a master of all trades and skills. But I can and should try. If the project you're working on requires computer skills, teach yourself those programs. If you're going to be living and working in a foreign country for a while, really try to learn the language. If you accept a gig, practice the material thoroughly, regardless of what the gig pays. Never excuse yourself from understanding what's going on. And never excuse yourself from doing your fair share of the work, even if you know that someone else would take up the slack for you.
3. It's Always Better to Know than to Not Know
Ignorance is not bliss. Ignorance is just ignorance, and it always has negative consequences. This is obviously related to the previous point. We all have limits to the information that we can absorb, and there are some facts that simply can't be known or are hard to face up to, but I can't think of a single circumstance in which I'd be better off not knowing the truth than knowing it. Always seek to be thoroughly informed, and you will make better decisions.
1. Stability = Prosperity
Also known as "a bird in hand is better than two in the bush". Most of my musician friends who suffer from financial trouble also have unstable gig situations. As I've mentioned before, it's tempting to drop your steady local gigs whenever a short-term, high dollar gig comes along, but that quick windfall might be followed by an extended period of NO income. You can do well by sticking with the steady work you already have and building upon that.
2. Don't Excuse Yourself
I constantly have to remind myself that I am fully, solely responsible for my own career. I know that I can't be all things to all people. I can't be a master of all trades and skills. But I can and should try. If the project you're working on requires computer skills, teach yourself those programs. If you're going to be living and working in a foreign country for a while, really try to learn the language. If you accept a gig, practice the material thoroughly, regardless of what the gig pays. Never excuse yourself from understanding what's going on. And never excuse yourself from doing your fair share of the work, even if you know that someone else would take up the slack for you.
3. It's Always Better to Know than to Not Know
Ignorance is not bliss. Ignorance is just ignorance, and it always has negative consequences. This is obviously related to the previous point. We all have limits to the information that we can absorb, and there are some facts that simply can't be known or are hard to face up to, but I can't think of a single circumstance in which I'd be better off not knowing the truth than knowing it. Always seek to be thoroughly informed, and you will make better decisions.
Friday, July 3, 2009
Economics 101 and Musicians
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.
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, 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.
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