Guest post by Nick Garcia, label manager of Sharam’s Yoshitoshi Recordings.
For all it’s chocked up to be, the DJ/producer lifestyle is usually not as glamorous as it sounds, especially when it comes to money. For every uber-successful artist with a Porsche and a villa in Ibiza, there are countless more who don’t know where their next rent check will come from. Performance, remix, and licensing fees don’t just fall from the sky, and chances are those streaming statements can barely pay for a cup of coffee. Therefore, I’ve compiled five tips for artists who find themselves struggling financially to maximize what their money can do, both now and in the future.
If you travel at least semi-frequently (or plan to) and don’t carry a lot of debt, there’s no reason you shouldn’t have a travel rewards credit card. The points will help pay for flights, hotels, and other travel expenses, and any good one with come with special services like roadside dispatch, lost luggage reimbursement, auto rental collision damage waivers, and more. Some cards will also give cardholders access to a special travel center where they can find incredible deals on flights and hotels that don’t make it to Google Flights, and many will give you a big points bonus if you spend a certain amount within a time period starting from activation of the account. Buy what you need to live on with the card, pay it off in full every month so you don’t pay any interest, and reap the rewards. Just make sure you don’t get one with an annual fee.
The life of an artist does not come with a 401(k). But that’s alright, because there’s something better that anyone can open: a Roth IRA. These nifty little long-term investment accounts are after tax, meaning the money you invest is (presumably) taxed income. Therefore unlike a 401(k), you aren’t taxed on the withdraw, which you can do at the age of 59 ½. You can open a Roth with T. Rowe Price or Schwab for $1,000, and contribute as little as $100/month. That might sound like a lot (and you obviously won’t get an employer match), but remember that man’s greatest invention is compound interest.
Consider the following: If you open the account at 25 and contribute $100 per month until you are 59 ½, assuming a market return of 8% you will have $204,000. Starting at 35 and contributing $200/mo, you will only have $168,000. See? Time is on your side.
If you increase that amount by $100 every eight years ($200/mo at 33, $300/mo at 41, and $400/mo at 49), you’ll have almost $780,000. That’s a lot of vinyl.
Calculate your Roth IRA savings here.
Digit is a great little savings tool that automatically pulls small amounts from a checking account based on your spending habits and earning potential. It calculates how much you can realistically save without noticing that you’re saving. I’ve been using it for over a year and am shocked whenever I check my Digit balance, mostly because I never noticed the money was missing. If you set it and forget it, Digit is a great way to save up for that next piece of kit you’ve been wanting. Have you saved $500 in four months? That’s a Korg Minilogue. $1500 in ten? Elektron Analogue Four. All this for a couple of bucks every few days that you won’t realize is gone.
Digit also has a goal-setting function that will save more aggressively. Set a target date and the amount, and let Digit do the rest. It will be more noticeable than Digit’s normal manner of operating, but automating that savings in small increments will still prove to be quicker and less painful than setting aside that money yourself. If there’s one thing personal finance and music production have in common, it’s that automation is a beautiful thing.
Ask any successful business person what the main secret to wealth is and there’s a good chance they’ll tell you, “buy assets and avoid liabilities.” Now, this does not just have to apply to rental properties and stock. The very gear you use to make music can be considered assets. Consider the fact that the Roland 303, released in 1982 for under $400.00 US, now fetches around $3,000.00 per unit on eBay. Could anyone have foreseen this in 1982?
Identify which brands are making gear that typically appreciates in value and invest in stuff that you think would if production suddenly stopped tomorrow. In other words, do your best to identify future classics. Chances are it will be a hell of a lot of fun to play as well.
Working as an artist/producer requires many nights spent out networking, supporting other DJ’s, and of course, performing. With this lifestyle comes a certain expectation of patronizing the bar (if you’re sober, congratulations, you can stop reading here). Using a debit or credit card in these situations can really add up because it’s easy to lose track of how much you’re actually charging with each drink. You might receive your tab at closeout and wonder, “how the hell did I spend that much?” The easy fix is to pull out some money from the ATM before you arrive at the club and leave the card at home. With your set budget, you won’t overspend, or, presumably, over-drink.
There are a lot of ways to be smart with your money, and the sooner you start the better. Make your money work for you so you can get the equipment you need, have the experiences you want, and lead a happier, less worrisome life.
Connect with Yoshitoshi Recordings: Online | Facebook | Twitter | Soundcloud | Beatport
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