Thursday, November 12, 2009


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.

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?

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.

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.

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.

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.

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.

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.

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.

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.

Friday, May 15, 2009

Don't Make it Personal

I was once advised to treat my money as though it belongs to somebody else, as though I have a solemn fiduciary duty to protect and preserve it for my future self. Looking back, I think that is some of the best advice I ever got. Money flows in and out of our lives like water, and perhaps because of its intangible, liquid nature, it can be easy to adopt a casual, easy-come-easy-go attitude about it. But without a constant, vigilant effort to preserve money, again just like water, it tends to evaporate.

Don't invest for personal, emotional, or sentimental reasons. If you have some money, you may be approached by friends or relatives to invest in their business ventures. They will probably be very sincere and persuasive about the prospect. It might sound exciting, and you will naturally want to help facilitate their dreams, but this is the point at which you need to remember your duty to preserve money for your own future. I recommend that you think very carefully and do a lot of thorough research before even considering such a proposition.

First of all, partnerships often end badly. You might be best friends in the beginning, starting off with the best of intentions, but sooner or later, somebody will want out of the deal. When that happens, the remaining partners have to take up the slack, figure out a way to buy out the share of the exiting partner, etc. Even if your business venture succeeds, the stress of co-owning a business can really strain relations. Sometimes, if a friend borrows money he is later unable to repay, you might wind up losing the friendship, too, simply because he is too embarrassed or ashamed to face you again.

Secondly, the failure rate of new businesses is very high. If the proposed investment is a new venture, there is a good chance that your entrepreneur friend hasn't really done all of her homework and doesn't completely know what she's getting into. If it's an existing business with a good track record there may be better odds, but why do they need your money if they are already doing so well? In any case, sinking a significant portion of your money into one business is a violation of the basic principle of investment diversification, and puts you at unnecessary risk.

When I do embark on a private business venture, I prefer to go it alone, limiting my investment to an amount that I can completely afford to lose, and knowing that if things don't work out I will only have myself to blame. For the bulk of my money, I always remember that responsibility to preserve it first, and I stick with boring, safe, impersonal types of investments.

Friday, May 8, 2009

Find a Niche

When I first came to L.A. back in the eighties, it seemed like everybody in this town was an aspiring shredder, complete with spandex, big hair, and Jackson guitar. I mean, there were more glam metal rockers here than there are Elvises in Vegas! It was a ridiculous overabundance of people all trying to get in on the pop culture fad of the moment. Of course, there wasn't nearly enough demand in the music business to accommodate the supply of rock bands in L.A. (still isn't, as a matter of fact), a state of affairs that led to the infamous "pay to play" phenomenon at Los Angeles nightclubs. We all know that when supply exceeds demand, prices fall, but did you know that when supply gets outrageously excessive, prices (i.e. musician's wages) can actually become negative? Don't let this happen to you!

How can you avoid such a fate? By finding a specialized niche. If you are trying to sound like the current Hip Hop chart toppers or American Idol winners, chances are that 1) that style will no longer be marketable by the time you master it, and 2) there are millions of other musicians aspiring to the same thing, so the competition for those gigs will be overwhelming. If, on the other hand, you devote yourself to mastering a less common or less currently popular genre of music, you may actually find it easier to get gigs and make money.

This seems ironic at first, but makes sense when one thinks about relative supply and demand. For example, when I lived in Washington, D.C., I was a member of a local Zydeco, make that the local Zydeco band! Certainly, Washington is not known as a hotbed of Cajun and Creole culture, but there were just enough Louisiana-style dancers there to generate steady demand for live Zydeco music. And when they needed a band, we were the only game in town! There was never any shortage of gigs for us.

Here in L.A., I know one band that plays Hawaiian music exclusively. To be honest, they are not the greatest master practitioners of that musical style, but they have their act all worked out, with hula dancers, leis and everything, and they work constantly making good money. I have another friend who specializes in early rock and R&B style drumming. He has deeply studied this style, owns plenty of authentic vintage drums, and has made a name for himself as the go-to guy in an often overlooked older style of music.

A geographical niche might also work for you. L.A. and New York are surfeited with professional musicians, but some smaller towns and rural areas are starving for entertainment. Once again, if you are the only game in town, you will get all the gigs! However, in smaller towns, there also is often a shortage of musicians to fill out your band, so watch out for that potential problem. Good luck, and I'd be curious to hear from you about any unusual niche gigs you have experienced.

By the way, there is yet another new free resource listing links of interest and benefit to independent musicians. Please check out Music Nomad.

Friday, May 1, 2009

Negotiation Part 2

Thanks for the helpful comments and tips contributed by readers to last week's blog entry! We have all learned some tough lessons through past negotiation experience. The important thing is to use that experience to your advantage in future deals. Here are a few more suggestions that I have on the subject:

1. Limit your own authority. You may have had the frustrating experience of bargaining with a car salesman at a dealership, and being told "I'll have to get approval from my manager for that price". This is a common ploy that is used to keep their price high. You seem to be bargaining with someone who lacks the authority to make price concessions, so you (the buyer) wind up making all of the concessions yourself. Of course, when you're buying a car, you should never tolerate this tactic. You should insist on negotiating directly with someone who has authority to agree on a price. But when you are selling your band's services to a club owner, the same kind of strategy can work to your advantage. If the client offers a fee below your asking price, you can tell him that you will need to consult with the other band members before agreeing to such a low fee, and chances increase that the busy club owner will make a concession on the spot just to get the deal closed promptly.

2. Play up your popularity. The music business is a lot like the fashion business. Everybody wants in on the latest fad, and nobody is interested in last year's products. We would all like to think that the service we offer is all about musical quality, but to a large extent, it is often about popularity, so the busiest bands often attract the best offers. If you seem to be really busy and in demand, clients will find you more appealing and also will feel like they have to compete (i.e. offer more money) to win your services. You should definitely let them know about all the great gigs you are currently involved in, but of course you must not lie. If you promise the manager that you can pack his club on a Monday night, you better be able to deliver.

3. Consider the whole package. A steady gig in hand is worth two in the bush, so consider making some price concessions in exchange for stable employment. Also, be willing to barter and cooperate to reach a deal. For example, if the venue is running on a really tight budget, you could agree to play for $10 less per band member in exchange for free meals. Some venues provide a house PA system for your use, which will save you a lot of setup time and trouble. That kind of thing may be worth making some bargaining concessions. On the other hand, if you have to schlep your own PA, lighting rig and instruments 100 miles to the club, then you should explicitly list those expenses to the club owner as justification for asking a higher price.

Every gig is different, so it is important to think all of these things through and be ready to adjust your fees to fit each circumstance. Also, if you find yourself getting so busy with work that you become stressed, then that is often a sign that it's time to raise your rates. A problem we would all love to have! :-)

Friday, April 24, 2009

Negotiation Part 1

Musicians complain constantly about being taken advantage of. Let's face it, most of us feel somewhat insecure about the strength of our negotiating position with employers, so we fail to drive a hard bargain, or perhaps fail to even negotiate at all. I'm no exception. Talking money is one of my least favorite parts of the job. It often seems as though the service that we provide is deemed frivolous or expendable. The bartenders, caterers, and waitresses all have to work, but the musicians get to play.....we probably shouldn't get paid at all!

The reality, however, is that competent professional musicians possess rare and highly developed skills which are essential to the success of the establishments that employ us. No disrespect intended to any other professions, but customers don't come to nightclubs to see the bouncers, they don't enroll in a music school because of its bookkeeper, they don't buy CDs because of the packaging, and they don't come to concerts to check out the engineer doing the monitor mix. It's the music that drives the business, and that's our department. Employers know this, and they are usually more willing to reward good talent than you might think.

There is no need to resort to cutthroat competition in order to be fairly compensated. Just bear in mind some basic principles and you should do fine. Remember that building a large network of good relationships will always be the key to your survival in music, so try to stand firm for your best interests while maintaining a sympathetic and cooperative tone. Here are a few key points to apply when negotiating:

1. Don't undercut yourself. Sometimes when I have a used piece of gear to sell, I catch myself setting a price based on what I imagine the buyer will consider a good price, instead of starting from a price that I wish to receive. It's like I'm negotiating against myself before the actual bargaining has even begun! Start higher than you think you can get and give yourself a chance to win a better deal. You'll be giving yourself room to compromise if necessary, and you might be pleasantly surprised at what the buyer is actually willing to pay.

2. Decide on your starting price and your minimum price in advance. If you get called upon to quote a price for a gig before you have thought everything through (travel and preparation time, equipment issues, etc.), you might feel uncertain about your bottom line, and that is a vulnerable negotiating position to be in. In such cases, I usually try to postpone the negotiation until I've had time to think out my position, or if pressed, I will simply quote a high price. I also have a rule of thumb that my time is generally worth $X per hour (a generous but not outrageous rate), so if someone proposes an unusual job that I haven't done before, I can simply quote them that rate and know that it will be worth my while if they accept.

3. Make small concessions. Let's say you're booking your band for a wedding gig. The client initially offers you $800 and you tell him that you normally charge $2000. These are your respective starting prices, and they don't mean much. You're both going to have to make concessions in order to reach a deal, but it's the next step that will determine the likely victor in this negotiation. If his counter offer is $850 and you respond with an offer of $1500, then two things have happened. First, he has signaled by his small concession ($50) that he intends to hold pretty firm to his price, and second, you have signaled by your large concession ($500) that you are willing to come down a lot more. The momentum of this negotiation is now definitely in the client's favor. Don't get in the habit of immediately saying "oh let's just split the difference". Start by making a small concession. Chances are the other party will follow with a large concession.

Next week, I'll share some more thoughts on the subject of negotiation.

Friday, April 17, 2009

Speculating vs. Playing it Safe

Few investors think of themselves as gamblers. These days, most of us would be happy to just earn a modest rate of return on our savings, perhaps enough to fund a comfortable retirement someday. However, we often fail to recognize the risks we are taking with our money. For some reason, musicians seem particularly vulnerable to getting drawn into risky, unconventional investments, when in fact they would probably have been better served by the most boring, safe, bland investment choices.

Perhaps it's because we aren't accustomed to having any spare money to invest! For whatever reason, it seems that when a musician runs into a small windfall of cash, he is usually uncertain of what to do with it. And when you don't know what to do with your money, you're most likely to first get wind of whatever the latest investment fad happens to be. A great investor named James Gipson used to refer to this as the "cocktail party test". Generally speaking, whatever "hot" investment people are currently talking about at cocktail parties is probably already at or near its peak, and when any investment has recently performed outstandingly well, it then becomes more likely to perform poorly in subsequent periods. Two recent examples of this are real estate and commodity prices (like oil). Can you recall a couple of years ago when everybody was trying to "get in" on the real estate market? It turned out to be the absolute worst investment available at the time, though it seemed like the best based on recent performance.

Inexperienced investors who place their precious savings into such investments often do so without fully researching the investment first, and without any awareness that such outsized investment performance is almost never sustainable. If you don't fully understand a speculative investment before getting into it, you are violating the principle of good investment diversification, and essentially gambling with your future.

Avoiding losses is more important than boosting returns, because losses are hard to recoup. If a given investment returns -50% this year, then it will have to return 100% the following year just to break even! Of course, we all have to take some risk in our investments, but if you do some research, you'll find that over the long run, some of the most diversified, simple, conservative investments (such as some index mutual funds and government bond issues) provide very competitive returns with far less risk than the latest exciting cocktail party conversation subjects.

Friday, April 10, 2009


How many professional musicians have you met or worked with? And how many of them did you get a business card from? And how many of those people have you spoken to recently? Every professional contact that you make is a potential doorway to future gigs. It goes without saying that you should always play your best and behave professionally on every gig, but once you have made a good impression on someone by performing well, it is a shame to let that door close by failing to exchange contact info. If you are afraid that offering your card to someone will make you seem too pushy, then simply compliment the other musicians at the end of the gig and ask for their cards. Invariably, they will ask for your card in return. I am constantly amazed by how few musicians carry business cards with them to gigs. Don't they want more work?

If you collect contacts regularly in this way, over time you will accumulate quite a large list of phone numbers. The music business really has no formal, civilized method for job placement, so these informal contacts are the primary way in which we get work. Therefore, your contact list is one of your most precious assets, and you should back it up periodically just as you do with critical computer data. Don't keep phone numbers only in your cell phone! One laundry mishap, and your whole network could be washed away.

Merely having a list of phone numbers won't guarantee you steady gigs, however. The busiest and most successful musicians I know all regularly tend their network like a garden. I have one busy friend with hundreds of contacts, and he has a policy of calling every person on his list at least once every six months just to say hello (and incidentally remind them of his existence). It's no coincidence that he works constantly, and has great relations with everybody he knows.

Other classic networking strategies include going out to see live music regularly, maintaining a content rich and up to date web site of your own, and of course, using social networking sites like You do have at least a MySpace Music page with quality demo songs on it, don't you? Other great places to meet musicians and build your network are retail music stores and music schools. Networking is much easier these days thanks to the Internet and modern technology. It still requires an investment of time and effort, but making that effort may have a greater impact on your career than anything else you can do.

Saturday, April 4, 2009

Buying Gear

It's tax season here in the U.S., and most of us self-employed artists are tearing our hair out trying to sort through piles of receipts and cancelled checks. If you bought a lot of musical equipment last year, you might be congratulating yourself in anticipation of the advantage you will gain from writing off all of that gear on your tax return. It's important to realize, however, that the cost of that equipment is only partially offset by reduced taxes. Those equipment costs simply reduce the amount of your Net Business Profit, which in turn is taxed at whatever tax bracket you fall in. So if you're in the 15% tax bracket and you buy a $100 piece of equipment, your tax bill will be reduced by only $15. You didn't really think that Uncle Sam was going to completely subsidize that fancy leather gig bag that you splurged on, did you? I'm not sure how other countries treat equipment purchases for tax purposes, but I suspect it's similar in many cases.

So did you really need all of those new instruments and stage clothes you bought last year? Perhaps you did. This is one area in which I'm not quite as ruthless a cost cutter as in other areas of my life. I figure that as a full time musician, I spend a lot of time with my instruments, so having nice equipment makes a big difference in my quality of life. Also, I owe it to my clients to create the best sound possible; and the basic equipment costs that a musician bears are still relatively inexpensive compared to startup costs of, say, a restaurant business.

But it's important not to get carried away with this mentality. Don't kid yourself into thinking that the tax write-off makes it okay to go hog wild with equipment purchases. You are ultimately paying for all of that stuff with money that could have otherwise been invested for your future. Also, don't forget that most musical equipment depreciates in value fairly rapidly. Very few instruments actually increase in value over time. And above all, it's important to keep in mind that what really counts most is in your fingers and in your creative skills, not in some shiny new piece of gear.

Thursday, March 26, 2009

Financial Black Holes

"No matter how much I earn, it just never seems to be enough!" Is this you? I honestly don't like to tell people how to live their lives, but this week I am going to court controversy a little bit and talk about some of the most common money traps that people tend to get themselves into. The following ventures may offer you unquantifiable rewards, may even be necessary in your life, but they will almost always place a substantial and continual demand on your pocketbook. If you haven't already made these kinds of commitments, I simply suggest that you think long and hard before taking the plunge.

Cars - I know, I know -- you can't get your gear to the gigs without one. That is certainly true for most of us (although I lived and gigged all over Japan for seven years without a car and it's still possible in some urban places like NYC), but there is no reason to burden yourself with more car than you really need. Taking out a dealer-financed loan on a $40,000 SUV just to transport your guitar and amp around to gigs is a massive waste of money. Even most drummers can fit all their gear into a much smaller, used car and still make it to the gig just fine. I have written about this before, but it bears repeating because of the many ways it can sap your finances. Crunch the numbers before you buy your next vehicle, and don't forget to factor in repair costs, insurance, resale value, and fuel costs.

Recording Studios - Full disclosure: I own both a car and a studio! Well, at least my car and studio are of the small, modest-budget variety...but still, to tell the truth, I'd be better off financially if I hadn't spent the dough on either one. If you run a commercial studio and keep it booked sufficiently to earn a profit, then more power to you. However, even most of the long-established studios here in LA are losing money these days due to advances in home recording technology. And even those who are staying in business have to constantly spend money to keep their equipment and software up to date. There always seems to be one more piece of expensive gear that's needed!

Real Estate - There, I said it! For generations, most of us have lived under the dubious assumption that it's always better to own a home rather than rent. The recent collapse of the housing bubble makes it easy to jump on the anti-real estate bandwagon, when in fact houses are now more affordably priced than they have been in years. But I've always been a little skeptical about homeownership, and I still am. Simply scraping together a sufficient down payment to purchase a home does not guarantee domestic bliss. You will still have to contend with average home maintenance costs and property taxes amounting to over 3% of the house's value per year. At the current U.S. median house price of $170,000, that comes to over $5000 annually just for taxes and maintenance! That's not including payments and interest on the mortgage. If you can truly afford it and the housing market turns around sometime soon, then real estate might be a good investment to consider. But you had better be patient and prepared to shell out a lot of money while you wait for that equity to grow. If you're single and already have a cheap deal on rent, you might consider staying put and investing the difference in stocks, bonds, or other investments.

Children - Okay, now I know that this one is going to generate some hate mail. Let me just say for the record that I do like kids. I was even a kid once myself! But that doesn't change the fact that the single best predictor of personal bankruptcy is having children. The cost of rearing children today is astronomical, and I have personally witnessed many of my friends struggle with the pressure of balancing parental responsibility and a musical career. It's not impossible, but it is hard. And unlike illness, injury, vagaries of the economic cycle or natural disasters, it is a choice that you get to make for yourself. Of course, once you make that leap, there's no turning back. I'm not telling you what to do. I'm just suggesting that you give these things some thought.

Friday, March 20, 2009

Mutual Funds and Exchange Traded Funds

Wait.... don't touch that dial! I know it's not a very titillating topic, and I also know that stock investing isn't very fashionable at the moment, but for the sake of long-term financial health it is a subject that everyone should know a bit about.

Have you ever found yourself with a little windfall of extra money and no idea how to invest it? Where did that money wind up? I think that most ordinary folks are a bit intimidated at the idea of picking stocks. How do I tell the good companies from the bad ones? When is the "right time" to buy in? For that matter, how do I even conduct the transaction?

Well, I'll let you in on a little secret: even the majority of professional economists and financial planners don't do much stock picking for their own portfolios. I don't either. In fact, I confess that I have never traded stock in individual companies, yet I have been investing in the stock market for over 15 years. How is that possible? Through mutual funds and exchange traded funds (ETFs). Basically, a mutual fund or ETF is a large pool of money contributed by many individual investors and managed by an individual or team of stock pickers, who do the research, make buy/sell decisions and handle the transactions on behalf of all the investors. Both mutual funds and ETFs charge a fee to their investors for this service. The fee for ETFs tends to be lower, but additional fees are charged for each transaction, so if you plan to buy or sell often, a mutual fund might be cheaper.

There may be several reasons that so many financial professionals choose mutual funds and ETFs over individual stocks. They may be trying to avoid potential conflicts of interest, or they might not have enough time to do adequate financial analysis and tracking of each investment. But I suspect the main reason is that they know the odds are against individual stock pickers. A lot of research shows that even the best professional stock pickers have a very hard time outperforming the stock market as a whole over the long run, so why not just settle for a mutual fund or ETF that samples the whole market? These are called index funds. They are cheap to manage, cheap to invest in, and that's where I keep most of my money.

Mutual Funds and ETFs can tremendously simplify the investment process for you, and offer you great diversification through one simple investment. All of these funds are consumer-friendly, with 1-800 numbers, nice websites, and easy to read statements. There are thousands of funds to choose from, and many considerations in choosing a mutual fund or ETF, but first I recommend reading my previous blog entry on the subject of fees, and then doing a little reading up on the subject of managed vs. index investing.

Yes, the stock market involves risk. If the phrase "past performance is no guarantee of future results" has scared you off in the past, think of what that ironically means today: next year might be a great year for stocks! The fact of the matter is that stocks still outperform every other kind of asset over the very long run, so it's unwise to dismiss stock investing entirely.

Saturday, March 14, 2009


So you've gone out and hustled up a bunch of gigs, and now you're looking for someplace to stash all of that cash. Where should you put it? You don't necessarily have to do all of your banking at the closest neighborhood commercial bank. In the United States, other options to consider include online banks, credit unions, savings banks, even PayPal!

Most of us musicians operate on an independent freelance basis, often receiving cash and checks from multiple sources. Every week, I get a stack of tiny little paychecks to deposit, so I need to have a convenient branch for day-to-day banking services. For this purpose, a checking account at the local bank is the way to go.

But frankly, keeping much more than your basic living expenses in a commercial bank account doesn't make sense these days. Have you looked at your bank's list of fees lately? I was recently charged $10 by my bank for receiving a wire deposit into my account. That's right -- they actually charged me a fee to accept a deposit! Many bank fees in recent years have been escalating at a double-digit rate, and when you consider the fact that they usually aren't even paying interest on your balance, there's no reason to reward them by depositing much more than the minimum balance.

For your larger, longer-term cash savings, consider opening an account at a credit union. Credit unions operate much like conventional banks, but are established and owned by groups of people with a common affiliation, such as a labor union or large employer. Many credit unions seek to expand their membership, so often they will accept you as a member even if you are not directly involved in the affiliated group. You will have to buy a token "share" of ownership in order to open an account, but because of the cooperative nature of credit unions, interest rates and fees are usually much more favorable than at conventional banks. Credit unions are also eligible for Federal deposit insurance, just like commercial banks.

Savings banks (and S&L's) are similar to commercial banks, and have traditionally offered somewhat more competitive rates. They have also traditionally gotten into more financial trouble, starting with the S&L crisis of the late 1980's and continuing with their large exposure to bad mortgages in the current banking crisis. Still, most deposits are insured, so you and I don't have to worry too much about it as customers.

Online banks, such as HSBC Direct and ING Direct, are giving brick-and-mortar banks a real run for their money. They reduce costs by not maintaining branches, and pass that on to you by offering very competitive rates. The downside, of course, is that you have to mail in all of your checks (unless you have direct deposit), and you give up the convenience of service at a local branch.

One other place you can keep some money is PayPal. Though it's not a bank (and not Federally insured), PayPal is now offering many of the same services as banks, including debit and credit cards, interest bearing accounts, and international money transfers. Personally, I'm looking forward to the day when all payments will be handled electronically. No more cash, no more checks, no more waiting in line at the bank on Monday afternoons, and no more absurd fees (hopefully)!

Friday, March 6, 2009

Be an Educated Consumer

I was browsing at a major consumer electronics retail store recently when I noticed a young couple shopping for camcorders. They looked perplexed and wary as they listened to the 17-year-old salesman explaining the product selection to them. Now, I don't know how their shopping experience worked out in the end, perhaps they found the perfect product and were completely satisfied. But my immediate thought was that these poor folks look like sitting ducks. They obviously hadn't done their homework, and the odds of getting the best deal without having researched the product are never good.

I know what you're thinking. Who has time to do product research and comparison shopping? With internet access, it is really so easy to research products that, in my opinion, there is just no excuse for making uninformed, impulsive large purchases. Of course, if you're shopping for dental floss, then the amount of money at stake is trivial. But serious penny pinchers like me will at least do some quick checking online to compare prices on all but the smallest purchases. It only takes a few minutes to look up a product on or through convenient price comparison websites like or

Another benefit of online product comparison is that many retail websites allow users to post product reviews. The two main pieces of information I'm looking for when shopping online are prices and reviews. Reading through consumer reviews can save you a lot of trouble, maybe even help you avoid buying an inferior product that you would have wound up replacing anyway. Subscription services like Consumer Reports offer the ultimate in-depth, objective reviews, but I've had good luck relying on the free reviews at most major shopping sites.

The bigger the purchase, the more time you should dedicate to researching online. If you are relying on retail salesmen to educate you about cars or household appliances, then you are at a major negotiating disadvantage. Make sure that you have some idea of the range of features and prices available before you talk to any salespeople.

Also, watch out for web retailers who try to lure you in with a low price quote, and then jack up the price at checkout with unreasonable shipping and handling charges. And for the best bargains, don't forget about buying used through sites like eBay and Craigslist. I built half of my home studio with Craigslist purchases!

Friday, February 27, 2009

Rule of 72

Ever wondered how much that music store line of credit is really costing you in interest? Or how much difference it will make to have your money stashed in a 4% Certificate of Deposit, as opposed to a 1% savings account? The Rule of 72 is handy for making quick thumbnail estimates of how interest accumulates.

First, I recommend reviewing my previous blog entry on the subject of compound interest. That can be a real eye opener for many people. Once you have an idea about how compound interest works, you start to understand how important it is to get the maximum return on your investments, and pay the minimum rate on your debt. Even a one or two percent difference can really add up over time.

If you are trying to make a decision or plan based on alternative possible interest rates and you don't have access to a precise compound interest calculator, just remember the following formula:

72 ÷ annual interest rate = number of years it will take for the balance to double

So, for example, if I invest $2000 at a compounded 6% rate of interest:

72 ÷ 6 = 12

In about 12 years, if I don't add or take out any money and the interest rate remains at 6%, my account balance should hit $4000. You can use the same calculation to estimate how long it will take your debt burden to double, or how long it will take for a given rate of inflation to double the cost of living.

I have been running a little experiment for some time now. In 1994, I put $100 in a credit union share account and resolved to make no more deposits or withdrawals until the account doubled in value. Well, it has been 15 years, and the balance currently stands at $168. Not too impressive, eh? That's because the average interest rate on that account over the past 3 years has been a paltry 1.07%. At that rate, it would take over 67 years for my $100 to double! Actually, my interest rate was slightly better in the '90s, so at the current rate, it should only take another 17 years. But that is still a total of 32 years! The lesson to be learned from this experiment: small differences in interest rates make big differences in results!

Friday, February 20, 2009

Getting Out of Debt

Okay, here's a topic that many musicians can relate to! People get into debt for all sorts of reasons, but it's only recently that getting out of debt has become fashionable. If you are currently drowning under an adjustable rate mortgage that's way beyond your means, then I'm afraid I don't have any silver bullet solutions to offer you....perhaps the government will figure out some way to throw you a lifeline.

But if you are simply struggling with garden-variety consumer debt or student loan debt, then there are some proven strategies for getting yourself out of the hole. First of all, as the old saying goes: if you find yourself in a hole, stop digging! Avoid additional debt like the plague. If you continue to allow yourself to think of borrowing as a solution rather than a problem, you will never escape debtor status, regardless of your income level. Most of my blog entries up to this point have been about living frugally and saving money. All of those habits will help you to eliminate debt as well. Since consumer loan interest rates are almost always higher than any reliable rate of available investment return, you should view paying off a loan early as tantamount to earning a high rate of return. Think of paying off your 11% credit card balance as a generous 11% gift to yourself, because that's what it is! That's more enticing than almost anything else you could spend your money on.

Lots of people owe money to multiple creditors, and often don't know how to prioritize their debt payments, so they just make the minimum payment on each bill that comes. Minimum payments are for suckers! The minimum payment option is designed to draw out your debt and earn the creditor maximum interest from you.

The first thing you should do is to make a list of all your credit accounts and find out the interest rate for each one. You can continue making minimum payments on the lower interest rate accounts for now, but target the highest interest rate first, and pay as much as you can on that account each month until it's paid off completely. After that one is paid off, target the second highest interest rate account in the same way, and you should be able to pay this one off even faster, because you now have one less account to service each month.

This strategy requires focused commitment to eliminating debt, because as you pay off your outstanding balances, your available credit limit will probably increase and those old temptations may arise again. Believe me, becoming debt-free is a very liberating feeling. It really is the best gift that you can give to yourself!

Friday, February 13, 2009

Restructuring Your Business

There's been a lot of talk lately about corporate downsizing and "trimming the fat". Perhaps you're in one of the unlucky bands who have already lost a steady gig when management decided to cut back on the entertainment schedule. It seems to be hitting everyone at this point.

Did you realize that you, too, are a business manager with downsizing alternatives? Sure, you are! Even if you operate as a sole proprietor, you may still be able to find ways to lower your costs of doing business and thus offer your clients better value. For example, you can:

1. Resize your act. If you normally perform as a five-piece band and the clubs are balking at your fees, you can offer to go out as a 3 or 4 piece for less money. The ultimate bargain is a solo act, but these gigs are usually limited to players of certain instruments (guitar, piano, etc.).

2. Cut back your hours/barter. Another deal you can strike with management is to play fewer hours for less pay, or agree to accept free food in exchange for giving up some pay. I'm not a huge fan of this option, because it may be hard to get back to the old pay scale once business improves again. Still may be preferable to having no gig at all, though.

3. Lay off middle management. If you have been getting most of your gigs through agencies, try contacting venues directly and booking more shows yourself to save on agency commissions. Of course, when dealing with a venue originally introduced to you by an agent, it would be unethical to later bypass the agent. Similarly, if local teaching studios have been booking most of your students for you, you might make significantly better pay by setting up your own studio and booking students yourself.

4. Renegotiate with suppliers. You should definitely be driving a hard bargain when making any equipment purchases these days. Don't be afraid to ask for a lower price! Most retailers are really desperate now, and they are very willing to negotiate.

Saturday, February 7, 2009

If You Can Handle It Now, Handle It Now

This simple motto has served my very well over the years in a number of contexts. The gist of it is that a good way to avoid the procrastinator's predicament is by dispensing with little tasks as soon as they come up. My rule of thumb is that, if it takes less than 5 minutes to handle something important and be done with it, then I will drop whatever I'm doing at the time to handle that task.

This might seem to contradict the importance of setting time-budgeting priorities. For example, I try to spend an hour every morning practicing piano. Nobody pays me to do it, it only happens because I make it a priority. But if, in the middle of my practice session, it occurs to me that I need to write a check or make a quick phone call, I will give myself a 5 minute break to take care of that. If it's under 5 minutes, then it's really not significantly cutting into my practice time, it's just a healthy, normal break. And handling it as soon as it occurs to me ensures that the task won't be forgotten.

This rule applies to a lot of money management issues. Balancing a checkbook, paying a bill, even transferring balances between accounts are all tasks that can be handled in almost no time, but how many of us let these tasks accumulate to the point of becoming an intimidating mountain of work? Remember, if you're letting too much of your money sit in a low-interest or no-interest account, then you're cheating yourself out of potentially significant annual interest income. It wouldn't take 5 minutes to write a check and transfer that money into your money market account.

Of course, there are many important tasks that cannot be properly handled in under 5 minutes, so time must be scheduled for dealing with bigger issues like devising a retirement plan. But you might be surprised at how many of life's tasks can be dealt with quickly and easily.

Friday, January 30, 2009


The type of person who chooses to embark on a career in the arts is, almost by definition, a risk-taker. Maybe not reckless, but certainly willing to take a chance on a less certain path in life. We also tend to get by on a pretty tight budget. So it's no surprise that lots of musicians don't carry even basic insurance coverage.

Your number one insurance priority should be health insurance. I once went for four years without any health insurance. I don't recommend that anyone else do that, but it was an especially lean period for me, and luckily, I didn't get sick. Eventually, I wised up and got myself a high-deductible individual policy, designed to be paired with a Health Savings Account (HSA). If you are basically healthy and have an adequate emergency fund set aside to cover some health costs, a high-deductible policy can keep your health insurance premiums surprisingly affordable. HSA accounts are a recent development in the U.S. They are like IRA accounts in terms of tax advantages, but you can take out money without penalty to cover your basic health care expenses each year. Those of you who live in civilized countries with nationalized health care can disregard the above discussion!

Also highly recommended to musicians is equipment insurance. You might think that your gear is covered by your homeowners or renters policy, but if you use the equipment professionally, or it is stolen or damaged on a gig away from home, you might be left high and dry. You usually need a separate policy or rider for your professional equipment, and it's typically pretty affordable. Obviously, all jurisdictions require you to carry auto insurance, and you'd be crazy to drive without it. But again, as with all other types of insurance, you should consider accepting higher deductibles or lower levels of coverage to lower your premium if you have an emergency account.

There are an almost infinite variety of insurance policies that you may not need. If you don't have a family to support, you should probably think twice about carrying life insurance. You might not even need renters insurance if you live a typical transient musician lifestyle and don't have a lot of valuable possessions. I usually don't opt for extended warranty coverage offered at consumer electronics stores or car dealers. Sometimes these deals just offer redundant coverage for defects already covered under the manufacturer's warranty, and often the seemingly small monthly premiums add up to excessive sums over time. Then again, if you're a klutz, or prone to losing your cell phones, maybe it's a good deal!

You might be getting the idea that I'm not enthusiastic about carrying lots of comprehensive, gold-plated insurance policies. You'd be right. In areas of life where you are vulnerable and really can't afford a loss, adequate insurance is essential, but don't try to insure 100% of the risk out of your life. It would probably take 100% of your money to do that!

Saturday, January 24, 2009

Have Your Cake and Eat It, Too?

I have some friends who only feel comfortable driving high-performance cars with leather seats. They are the same folks who always order the steak when we go to a restaurant. I drive a 14 year old Toyota Corolla and bring a bag lunch when I have to eat out.

Now, there's nothing wrong with living well, as long as you're living within your means. If you really value an expensive lifestyle, then there are careers which can support that: law, business, medicine, etc. But if you want to play music for a living, I'm sorry, but you may be setting yourself up for a lot of frustration. Let's face it, the music biz is not generally known as a gravy train, and if you went into it for the money, you're in for some unpleasant surprises.

It is certainly possible to earn a lot of money in the music business, but to consistently earn a lot of money is very rare indeed. There is nothing sadder, and sadly nothing more common, than seeing a talented musician reluctantly take a day job or even go bankrupt due to an overindulgent lifestyle.

The good news is that, if you can be content with a modest lifestyle, you can really prosper on a low income. Remember that what counts over the long run is not your income, but your savings. It's not what you earn, it's what you save. If you earn $30,000 a year and only spend $20K, then you're socking away a very respectable 10 grand per year.

As a matter of fact, you would be better off financially in the above scenario than if you had spent $70,000 out of an $80,000 dollar income. Why? Because people who earn $80,000 are in a higher tax bracket. In the U.S., an $80,000 taxable income puts you in the 28% tax bracket, while a $30,000 income puts you in the 15% bracket. Even major touring artists and large corporations recognize that it's advantageous to save a higher percentage of a lower gross income, and therefore they work hard to cut costs.

If you spend all of your time hustling to earn more money, then when are you going to get around to recording that solo album you've been planning for years, or take that advanced arranging and orchestration class you've been wanting to take? Finding contentment at a lower living standard can actually be very liberating in many ways.

I think that most of us tend to aspire to at least match the lifestyle our parents enjoyed when we were growing up. If you happen to come from a privileged background, then a musician's lifestyle might feel like a step down to you. Lifestyle is a very personal thing, and you have to be honest with yourself about what is going to make you happy. But remember that everything in life is a tradeoff, and money can't buy musical bliss. Good luck in finding your own comfort zone.

Friday, January 16, 2009

Financial Advisors, Sharks, and How to Tell the Difference

Don't let confusion or intimidation about the investment world prevent you from securing your financial future. Many of the concepts you need to understand can easily be explained in plain English, and this blog seeks to do just that. But, ultimately, you will still have to make specific investment choices for yourself.

There simply isn't any one formula or "silver bullet" investment plan that is right for everyone. Professional investment advisors exist for the purpose of helping you sort out your own ideal investment mix. Unfortunately, as recent Wall Street scandals have shown, there are some unscrupulous people working in this business, so I'd like to offer some advice for helping you to pick an advisor.

Probably the most important thing to watch out for in seeking investment help is conflict of interest. Your advisor should be working with only your best interests in mind, so that's why I recommend that you avoid advisors who accept commissions or payment from mutual funds, insurance companies, or any third party. Look instead for a fee-only financial planner. These advisors may charge you a higher hourly rate for their time (or may not), but you get the assurance of knowing that they are really working for you, instead of essentially working as salesmen for someone else. If you have any doubt about this, don't hesitate to ask them directly whether or not they accept any sales commissions or third party compensation. There is also a national association for fee-only advisors, the National Association of Personal Financial Advisors.

Other important factors to inquire about include experience, training, track record, and investment style. After reading this blog and other investment advice, you may have already reached some conclusions about your own risk tolerance and investment preferences. Most good advisors are open to discussing these issues with you and honoring your personal wishes. Sometimes, people with very low risk tolerance get mismatched with an aggressive financial planner and wind up being taken on a roller coaster ride that they otherwise wouldn't have chosen to get on. Or the opposite kind of mismatch can happen, too.

Impressive past results and glowing reviews from satisfied clients are great, but remember that your own results may differ, and your personal needs may be different from the needs of those other clients. Don't look for hotshot performance or trendy investment choices. A good financial plan seeks long-term, stable, reasonable returns.

Also, be aware that there are no legal training requirements for financial advisors, but of course you want to find a knowledgeable one, so a Certified Financial Planner (CFP) credential, or at least a business degree, is probably a good thing to look for.

Ultimately, you don't have to hire a financial advisor. You could, for example, do some homework and calculating on your own, and then pay a modest sum to a fee-only advisor for a brief session to review and critique your plan.

Friday, January 9, 2009

Retirement Savings

Okay, so the big consumption party ended in 2008 and now we're all ready to tighten our belts and get serious about saving, right? But where to begin? The whole concept of investing seems pretty alien and intimidating to most musicians and ordinary folks. I've already addressed some basic investing principles in last year's blog entries, but now I'd like to offer some advice on how to go about choosing your own specific investments.

You don't need a degree in finance to invest wisely and successfully over the long run. It may be wise to hire a financial planner, at least to help you get started, so next week I will discuss choosing your financial advisor. Everybody's individual situation is different, so getting an expert's opinion on your personal situation can be very helpful.

For starters, though, it's pretty safe to offer a couple of generalizations for beginning investors. First of all, I want to stress the importance of establishing an emergency account before embarking on longer-term investment plans. The recent volatility in employment and throughout the economy makes me appreciate my own money market emergency account more than ever. Without some cash to fall back on, it can be very scary to keep working as a musician in tough economic times.

Once your basic emergency account is established and funded, where should you invest next? Very often, experts recommend that you take advantage of any available tax deferred retirement plans before investing elsewhere. If you are a young, single musician, retirement might not seem like the most urgent financial goal to be worried about. But then again, if you plan on being self-employed for life, who do you think is going to be planning your retirement for you? If you live in America, you might be counting on Social Security. Personally, I hope that Social Security will still be around when I reach retirement age, but I'm certainly not counting on it. And even if the system remains in good shape, Social Security checks really don't amount to a livable income, so you'd better start saving for yourself.

Fortunately, in the U.S., there are numerous types of retirement savings accounts available with excellent tax advantages. These include Individual Retirement Accounts (IRAs), Roth IRAs, Simplified Employer Pension (SEP) IRAs, and 401k plans, among others. Basically, all of these accounts are somewhat similar to traditional pension plans, but are held as individual accounts, instead of being pooled together among many company employees, as in traditional pension plans. Since musicians are generally self-employed, the pension option isn't usually available (unless you qualify for the musician's union pension plan), so these other alternatives are available to us. It can be tricky to sort out the differences between these different account types, but they all have some things in common:

1. Money in these accounts grows without being taxed until you take it out at retirement, and in some cases, you can also deduct the amount of your annual contributions on your tax return. That is a potential double tax benefit, which might not seem like a big deal, but in fact it can have a dramatic compounding effect on your ultimate payout.

2. Your contributions are subject to some limited annual amount, which varies depending on your income and the type of account. This is why it's so important to start saving early in these accounts, because you may not be able to make up the difference later through bigger contributions.

3. Most of the money in these accounts may not be taken out until retirement age without paying a significant penalty, with a few exceptions for things like catastrophic medical expenses. This may seem like a disadvantage, but it actually forces you to preserve your own retirement savings.

4. Money in any of these accounts can usually be transferred ("rolled over") to another retirement account without penalty, as long as you follow proper procedures for the transfer. So, for example, if you quit working at a company with a 401k plan, you may be able to transfer your 401k account into a personal Roth IRA account.

For self-employed musicians, I particularly recommend checking into Roth IRAs and SEP IRAs. To determine the best account type for you, start by reading this introduction to the different account types. Next time, we'll discuss choosing a financial advisor to help you through the process.

Friday, January 2, 2009

A Few Money Saving Tips for the New Year

You know that I love to look for bargains! Here are some more random tips that I've picked up for saving money.

  1. Learn how to do basic maintenance on your own gear. If you're playing for a living, you really shouldn't be paying somebody else to intonate your guitars or to change fuses for you. Besides, the ability to do a quick truss rod adjustment can save your butt on a gig.
  2. If you're going to a gig which will include long breaks or downtime, bring a book or something productive to do. Otherwise, you'll probably wind up going to waste money on overpriced coffee or fast food with the rest of the bored band members.
  3. Use rechargeable batteries and AC adapters when possible, and keep a log book for battery changes. I know lots of musicians and soundmen who waste batteries like crazy. You don't want to get caught with a dead battery mid-gig, but it's easy to learn the average battery life for each piece of gear and change them on a reasonable schedule.
  4. For Guitarists and bassists. Always wash your hands with soap before you play, and wipe down the strings with a clean cloth after every gig. Your strings will last a lot longer, but it only takes one song played with dirty hands to kill those strings, so this rule has to be followed strictly in order to really prolong string life.
  5. Carpool to the gig. I once came down with a bad flu bug in the middle of a gig 60 miles from home. Thank goodness I had carpooled with the drummer, so I didn't have to drive myself home in that condition! Good companionship, good for the environment, good for your pocketbook.
  6. For extended range bassists. Don't buy 5 string bass sets, as they are overpriced. Instead, buy 4 string sets in bulk and individual B strings separately. To save even more money, buy one B string for every two sets of 4 strings, and change your B string every other time you change strings. New B strings don't really sound noticeably better than old ones, anyway!
  7. If the gig includes a free meal, arrive early and hungry to take advantage of it (though it is courteous to offer a tip to the server). If the gig doesn't include a free meal, eat at home first and avoid cutting into your profits. In my experience, bands don't usually perform their best on a full stomach, anyway.
  8. Always have a friend who works at a music store! Not only will you benefit from rock bottom discounts on gear, but you will also undoubtedly get better service.
  9. Need a white bow tie just for one particular gig? Check thrift stores for great deals on cool stage clothes.