- 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.
- 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.
- 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.
- 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.
- 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.
- 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!
- 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.
- 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.
- Need a white bow tie just for one particular gig? Check thrift stores for great deals on cool stage clothes.
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.
Friday, December 26, 2008
Keeping Books
Are you one of those self-employed musicians who only records income based on 1099 forms and only records expenses by throwing some receipts into a box for your accountant to deal with next year? I've been encouraging everyone to get a better handle on their own spending and saving habits, and the best way to do that is by setting up and maintaining some kind of systematic accounting records for your business.
If you've been sloppy in your past bookkeeping, the New Year is a perfect time to start fresh with a simple accounting system for all income and expenses. It can be as simple as resolving to write down each day's income and expenses on a written log before going to bed at night, or you can buy a program like Quicken, or try David Hahn's free Gig Tracker spreadsheet.
How much of your income you report for tax purposes is between you and the IRS, but I highly recommend that you get a clear picture of where your money is coming and going for your own sake. It's really a necessary first step before you can do any effective budgeting, and it also gives you a clear sense of your career progress relative to any goals you have set.
Also, please don't neglect to write down every possible business expense and keep all receipts! If you're not sure about something, write it down and check its deductibility later with your tax preparer. Business expenses are used to directly reduce net business income on US Schedule C tax forms, so every little expense makes a real difference in your bottom line tax liability.
If you've been sloppy in your past bookkeeping, the New Year is a perfect time to start fresh with a simple accounting system for all income and expenses. It can be as simple as resolving to write down each day's income and expenses on a written log before going to bed at night, or you can buy a program like Quicken, or try David Hahn's free Gig Tracker spreadsheet.
How much of your income you report for tax purposes is between you and the IRS, but I highly recommend that you get a clear picture of where your money is coming and going for your own sake. It's really a necessary first step before you can do any effective budgeting, and it also gives you a clear sense of your career progress relative to any goals you have set.
Also, please don't neglect to write down every possible business expense and keep all receipts! If you're not sure about something, write it down and check its deductibility later with your tax preparer. Business expenses are used to directly reduce net business income on US Schedule C tax forms, so every little expense makes a real difference in your bottom line tax liability.
Friday, December 19, 2008
Purposeful Giving
This is the time of year when many of us get into the spirit of giving and donate our time or money to various charitable causes. It's also a time when many nonprofits conduct their biggest fundraising drives. Salvation Army bell ringers and toy drives for underprivileged children are as closely associated with the holiday season as poinsettia plants and Santa Claus. It feels good to chip in for a good cause, but how much thought do you put into it?
According to the National Center for Charitable Statistics, there are well over a million public charities in the United States alone, and the number is growing rapidly. Most of these organizations are ethically run by people with the best of intentions. Some are well funded and effective, others less so. The last time you gave money or donated your time to perform for a benefit concert, did you do any checking on the charity you were supporting? Neither did I, but I should have. If you think about it, charitable contributions are really just another expense in your budget, and there's no reason they shouldn't be subjected to the same sort of scrutiny as your equipment purchases or grocery bill.
Let me be clear: I'm not suggesting that you shouldn't give to charity. I am suggesting that it is wise to actively choose your charities, rather than passively let them choose you. It may feel awkward or wrong to refrain from pulling out your wallet when you get an unsolicited phone call from a good cause or are confronted directly by a fundraiser on the street. But giving charitably only to organizations that happen to cross your path is sort of like only buying the food that's prominently displayed at eye level on store shelves (often the most profitable items for the store, but not necessarily the best for you).
Please take some time to consider what causes are most important to you, and where you think the greatest need exists. It takes a little research to find the best charities to suit your values, but there are some great online tools available to help you for free. Please check out these sites for starters: Charity Navigator, Guidestar
And remember, if money is tight (as it is for many of us these days), donating your time or skills to a really worthy cause can be a great way to help make a difference at any time of the year. Best wishes to you all this holiday.
According to the National Center for Charitable Statistics, there are well over a million public charities in the United States alone, and the number is growing rapidly. Most of these organizations are ethically run by people with the best of intentions. Some are well funded and effective, others less so. The last time you gave money or donated your time to perform for a benefit concert, did you do any checking on the charity you were supporting? Neither did I, but I should have. If you think about it, charitable contributions are really just another expense in your budget, and there's no reason they shouldn't be subjected to the same sort of scrutiny as your equipment purchases or grocery bill.
Let me be clear: I'm not suggesting that you shouldn't give to charity. I am suggesting that it is wise to actively choose your charities, rather than passively let them choose you. It may feel awkward or wrong to refrain from pulling out your wallet when you get an unsolicited phone call from a good cause or are confronted directly by a fundraiser on the street. But giving charitably only to organizations that happen to cross your path is sort of like only buying the food that's prominently displayed at eye level on store shelves (often the most profitable items for the store, but not necessarily the best for you).
Please take some time to consider what causes are most important to you, and where you think the greatest need exists. It takes a little research to find the best charities to suit your values, but there are some great online tools available to help you for free. Please check out these sites for starters: Charity Navigator, Guidestar
And remember, if money is tight (as it is for many of us these days), donating your time or skills to a really worthy cause can be a great way to help make a difference at any time of the year. Best wishes to you all this holiday.
Friday, December 12, 2008
Good Will to All
It's December, and I guess I'm getting a little sentimental. Every time the end of the year rolls around, it's natural to take stock of where we are and where we seem to be heading in life. Personally, I always find myself astonished that I've actually gotten away with another year of playing music for a living! The exact mechanics of sustaining such a career are a bit mysterious, but it definitely has a lot to do with personal relationships and good will.
It is a small world after all, especially in the music business. Word gets around fast, so even if you aren't altruistically motivated to be nice to people, you will certainly need to be agreeable simply for practical reasons. I like to think of my relationships with people sort of like gas tanks! Every person I know has a certain reserve of good will towards me, and every interaction I have with that person serves to either fill up or deplete that reserve. The goal is to maximize everyone's good will reserve towards me.
The funny thing is, although a good will reserve can be depleted very quickly and easily, there is virtually no way to rapidly build good will. It can only be built up to a high level through demonstrating steady, long-term positive attitude, ethical behavior, and reliability. Sure, referring someone to a high paying gig will score you some quick brownie points, but a one-time favor won't engender as much loyalty as years of showing up on time, or handling many small problems without complaint.
I have witnessed many cases of highly competent musicians gradually working their way up to positions of trust and gainful steady employment, only to lose it all over a single ethical breach. I've learned firsthand how easily good will can be destroyed through neglect, or by being unpleasant. In one case, I lost a gig because, after a particularly rough performance, I told the bandleader that I thought he needed to practice more. I've also lost gigs simply because I fell out of contact with the bandleader, or turned down one too many gigs. People have short memories, and allowing yourself to be forgotten is one way of depleting good will.
Always, always, always stay on good terms with everybody whenever possible. If you have to leave a gig for any reason (even if it's because you hate the gig!), try not to make it personal. Don't let people walk all over you, but leave your bridges unburned, because frankly, there's no advantage to be gained from burning them. Exercising patience and tolerance in all of your relationships will serve you in good stead as you advance to better gigs, where positive attitude is a prerequisite. It's also better for your blood pressure! Peace.
It is a small world after all, especially in the music business. Word gets around fast, so even if you aren't altruistically motivated to be nice to people, you will certainly need to be agreeable simply for practical reasons. I like to think of my relationships with people sort of like gas tanks! Every person I know has a certain reserve of good will towards me, and every interaction I have with that person serves to either fill up or deplete that reserve. The goal is to maximize everyone's good will reserve towards me.
The funny thing is, although a good will reserve can be depleted very quickly and easily, there is virtually no way to rapidly build good will. It can only be built up to a high level through demonstrating steady, long-term positive attitude, ethical behavior, and reliability. Sure, referring someone to a high paying gig will score you some quick brownie points, but a one-time favor won't engender as much loyalty as years of showing up on time, or handling many small problems without complaint.
I have witnessed many cases of highly competent musicians gradually working their way up to positions of trust and gainful steady employment, only to lose it all over a single ethical breach. I've learned firsthand how easily good will can be destroyed through neglect, or by being unpleasant. In one case, I lost a gig because, after a particularly rough performance, I told the bandleader that I thought he needed to practice more. I've also lost gigs simply because I fell out of contact with the bandleader, or turned down one too many gigs. People have short memories, and allowing yourself to be forgotten is one way of depleting good will.
Always, always, always stay on good terms with everybody whenever possible. If you have to leave a gig for any reason (even if it's because you hate the gig!), try not to make it personal. Don't let people walk all over you, but leave your bridges unburned, because frankly, there's no advantage to be gained from burning them. Exercising patience and tolerance in all of your relationships will serve you in good stead as you advance to better gigs, where positive attitude is a prerequisite. It's also better for your blood pressure! Peace.
Friday, December 5, 2008
Keeping Investment Costs Low
Okay, admittedly not the most mouthwatering topic to most musicians, but trust me, it's important and easy to understand. What are investment costs? These are the fees that all those vilified Wall St. guys make their living from. If you trade individual stocks, you will pay a stock brokerage fee every time you buy or sell (thus, the broker has an incentive to get you to trade often). If you put your money in mutual funds, an annual fee (called the "expense ratio") will be deducted from your account, and you might pay additional fees (called "loads") whenever you buy or sell shares. Even if you decide to put your money in a "free" savings account at your local bank, they will get their piece of it by offering you a lower interest rate than they are getting when they lend that money back out.
It is reasonable for qualified investment professionals to charge something for their services, especially when they are helping you to monitor your portfolio and choose wisely between different investments. But there is no need to pay exorbitant fees for such services, and many investment advisers are still getting away with charging too much in my opinion. Fees in the range of 1.5% or close to 2% per year are not uncommon among mutual funds and portfolio managers, even at times like this when returns are poor.
1.5% may not sound like much, but over time, fees like that can significantly reduce your returns. For example, let's say you have $10,000 to invest for 10 years:
Mutual Fund A
Expense ratio: 1.5%
Annual gross return: 10%
After 10 years, you'll have: $22,610
Mutual Fund B
Expense ratio: 0.5%
Annual gross return: 10%
After 10 years, you'll have: $24,782
That's $2172 more that you could have collected just by selecting the fund with a lower expense ratio. That's a 9% difference in only 10 years! Notice that both funds had the same results in the market. In reality, different funds will vary in performance, but the funds with higher fees don't necessarily perform better. The only difference here is that one of the funds managed to negotiate a bigger cut for themselves. The difference is magnified further over longer periods of time. Also, this example assumes that neither fund is charging you a load for buying or selling shares. That would reduce your results even more.
Ultimately, it's up to you to pick your investments based on a number of criteria. Investment cost is only one of those considerations. But let me leave you with one final thought: A mutual fund manager overseeing accounts worth $50 million (small by industry standards) will earn $500,000 per year by charging a one percent expense ratio. Isn't that enough?
It is reasonable for qualified investment professionals to charge something for their services, especially when they are helping you to monitor your portfolio and choose wisely between different investments. But there is no need to pay exorbitant fees for such services, and many investment advisers are still getting away with charging too much in my opinion. Fees in the range of 1.5% or close to 2% per year are not uncommon among mutual funds and portfolio managers, even at times like this when returns are poor.
1.5% may not sound like much, but over time, fees like that can significantly reduce your returns. For example, let's say you have $10,000 to invest for 10 years:
Mutual Fund A
Expense ratio: 1.5%
Annual gross return: 10%
After 10 years, you'll have: $22,610
Mutual Fund B
Expense ratio: 0.5%
Annual gross return: 10%
After 10 years, you'll have: $24,782
That's $2172 more that you could have collected just by selecting the fund with a lower expense ratio. That's a 9% difference in only 10 years! Notice that both funds had the same results in the market. In reality, different funds will vary in performance, but the funds with higher fees don't necessarily perform better. The only difference here is that one of the funds managed to negotiate a bigger cut for themselves. The difference is magnified further over longer periods of time. Also, this example assumes that neither fund is charging you a load for buying or selling shares. That would reduce your results even more.
Ultimately, it's up to you to pick your investments based on a number of criteria. Investment cost is only one of those considerations. But let me leave you with one final thought: A mutual fund manager overseeing accounts worth $50 million (small by industry standards) will earn $500,000 per year by charging a one percent expense ratio. Isn't that enough?
Friday, November 28, 2008
Thanksgiving
Just a few personal reflections this week in the spirit of the holiday:
I'm thankful to be healthy, happy, and doing what I love for a living.
I'm thankful for the excellent mentors and role models who have helped point the way for me.
I'm thankful that progress doesn't come easily, because that means there is always potential to improve, and every accomplishment brings greater satisfaction when you know you have really worked for it.
I'm thankful for the good will, fun times and huge inspiration I get from so many amazing music business friends.
I'm thankful to realize that I don't really need very much, and the world is providing more than I need.
I'm thankful for the freedom to be my own boss and choose my own course in life.
I'm thankful that economic necessity has forced me to be less prideful and take gigs that made me learn and grow.
I'm thankful for all of the lessons yet to be learned, and for all of the creative works yet to be unveiled.
Best wishes to all of you this season!
I'm thankful to be healthy, happy, and doing what I love for a living.
I'm thankful for the excellent mentors and role models who have helped point the way for me.
I'm thankful that progress doesn't come easily, because that means there is always potential to improve, and every accomplishment brings greater satisfaction when you know you have really worked for it.
I'm thankful for the good will, fun times and huge inspiration I get from so many amazing music business friends.
I'm thankful to realize that I don't really need very much, and the world is providing more than I need.
I'm thankful for the freedom to be my own boss and choose my own course in life.
I'm thankful that economic necessity has forced me to be less prideful and take gigs that made me learn and grow.
I'm thankful for all of the lessons yet to be learned, and for all of the creative works yet to be unveiled.
Best wishes to all of you this season!
Friday, November 21, 2008
Investment Diversification
In a recent blog entry, I emphasized the advantages of pursuing multiple musical income sources: higher total income, greater income stability, and increased networking opportunities.
The same principle applies to investing your hard-earned money. Maintaining a diversified investment portfolio basically means not putting all of your eggs into one basket. Remember when you told your parents that you wanted to be a musician, and their first reaction was to tell you to make sure you have another skill "to fall back on"? Well, I didn't like to hear it either, but looking back, I have to admit it was probably good advice.
In a similar way, betting most or all of your precious money on a single investment can be risky. If, for example, you choose to invest in stocks, most experts recommend holding stock of at least five to ten different companies to achieve reasonable diversification.
If you had invested all of your money in Lehman Brothers Holdings one year ago, you'd be broke right now because they went bankrupt in September. Few could have predicted that such a large firm, with a long and reputable history, would have been brought down so quickly. Even many highly trained and experienced professional investors regrettably invested in Lehman recently, so none of us are immune from making these kinds of mistakes.
If, on the other hand, you had invested half of your money in Lehman Brothers, and the other half in Star Scientific, Inc. (which has had a great year), you'd be roughly breaking even at this point. You would still be under-diversified, in my opinion, but this example illustrates the fact that even a little diversification is much safer than none at all.
As a small, individual investor with limited information, it can be hard to compete with the pros at picking good individual stocks or other investments. Perhaps even more importantly, brilliant artists like myself are too busy honing our creative genius (joke) to be bothered with monitoring the day-to-day performance of every stock and constantly worrying about timing our trades just right.
For people like us, there are mutual funds and ETFs. A detailed discussion of these investment vehicles is a subject for a future entry, but suffice it to say that they offer diversification in a simple package to the small time investor. Mutual funds and ETFs of the low cost index variety offer the ultimate in diversification.
If diversification is so great, why aren't all investors super diversified? The short answer is that they think they are smarter than the rest of us. If you are smart enough to only pick the winners and time every transaction ideally, then you can do better with an undiversified portfolio. Unfortunately, VERY FEW investors can pull this off with any consistency. Like, virtually nobody. Lots of people found this out the hard way recently when they tried sinking all of their money into real estate at the wrong time. They weren't diversified, and they bet on the wrong horse.
I'll be honest. Most types of assets have been losing value lately, so even diversified investors are getting burned. But just as a musician with multiple steady gigs can afford to lose one of those gigs, a well-diversified investor can avoid losing the whole enchilada when a few stocks go south.
The same principle applies to investing your hard-earned money. Maintaining a diversified investment portfolio basically means not putting all of your eggs into one basket. Remember when you told your parents that you wanted to be a musician, and their first reaction was to tell you to make sure you have another skill "to fall back on"? Well, I didn't like to hear it either, but looking back, I have to admit it was probably good advice.
In a similar way, betting most or all of your precious money on a single investment can be risky. If, for example, you choose to invest in stocks, most experts recommend holding stock of at least five to ten different companies to achieve reasonable diversification.
If you had invested all of your money in Lehman Brothers Holdings one year ago, you'd be broke right now because they went bankrupt in September. Few could have predicted that such a large firm, with a long and reputable history, would have been brought down so quickly. Even many highly trained and experienced professional investors regrettably invested in Lehman recently, so none of us are immune from making these kinds of mistakes.
If, on the other hand, you had invested half of your money in Lehman Brothers, and the other half in Star Scientific, Inc. (which has had a great year), you'd be roughly breaking even at this point. You would still be under-diversified, in my opinion, but this example illustrates the fact that even a little diversification is much safer than none at all.
As a small, individual investor with limited information, it can be hard to compete with the pros at picking good individual stocks or other investments. Perhaps even more importantly, brilliant artists like myself are too busy honing our creative genius (joke) to be bothered with monitoring the day-to-day performance of every stock and constantly worrying about timing our trades just right.
For people like us, there are mutual funds and ETFs. A detailed discussion of these investment vehicles is a subject for a future entry, but suffice it to say that they offer diversification in a simple package to the small time investor. Mutual funds and ETFs of the low cost index variety offer the ultimate in diversification.
If diversification is so great, why aren't all investors super diversified? The short answer is that they think they are smarter than the rest of us. If you are smart enough to only pick the winners and time every transaction ideally, then you can do better with an undiversified portfolio. Unfortunately, VERY FEW investors can pull this off with any consistency. Like, virtually nobody. Lots of people found this out the hard way recently when they tried sinking all of their money into real estate at the wrong time. They weren't diversified, and they bet on the wrong horse.
I'll be honest. Most types of assets have been losing value lately, so even diversified investors are getting burned. But just as a musician with multiple steady gigs can afford to lose one of those gigs, a well-diversified investor can avoid losing the whole enchilada when a few stocks go south.
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