Musicians often live and breathe their work. Between writing, recording, producing, practicing, and performing, there may not always be time to think about much else, even the money to be made from music, or how much has to be spent to sustain a career. But as the saying goes, failing to plan is often planning to fail. As a financial planner and consultant, I’ve seen many artists and teams suffer the consequences of not planning for the future, but I’ve also seen many reap the rewards of planning well.
Thinking about investments and planning strategies may seem daunting and even unnatural for artists and musicians. But it really boils down to a few important concepts, some of them specific to the music industry and some of them more universal. My prior experiences, from banking to supply chain to running my own businesses, led me to establish and co-found our Virginia-based firm, Forte Impact Advisors. We help a wide variety of professionals manage the complexities of their income and expenses, including musicians.
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I’ve come to realize what principles are most crucial for musicians and music industry leaders to understand so they can navigate the increasingly complex economics of one of the most rapidly changing industries.
Top 5 Things That Everyone in Music Industry Should Know
- Know your goals.
If you don’t know where you’re headed, it’s impossible to plan. It’s like saying, “I’m going on tour on the West Coast, and I’m currently facing south, so let’s take a right out of the driveway and hope we get there.” We need GPS, step-by-step guidance to get to our specific, targeted venue…and to periodically re-route when there’s traffic, detours, or accidents that require an adaptation to our course.
The same is true with our finances. What are some short-term goals you have? Is it paying off student loans, moving to Nashville, landing a particular job? What about long-term goals? Do you hope to buy a house? Start a business? Make an impact through philanthropy? What are your hopes for retirement? Many musicians look at their work not so much as a vocation but as a lifelong artistic pursuit and may plan to never stop performing or recording even if they can afford to do so. But that doesn’t mean that musicians can’t or shouldn’t plan for a “quasi-retirement” or “financial freedom day” just like anyone else.
Asking yourself these questions will help inform what we call a “Centralized Savings Strategy,” which determines how much of your money is going toward those goals.
- Know where your money is.
Is your money hiding from you? It’s important to have an inventory of your intellectual property so that you are tracking money that is owed to you. Are you tracking all of your royalties, copyrights, and other intellectual property? Do you have all of your IP properly registered?
And what about other sources of income? Do you know where to find your income from international performances, streaming, features on others’ recordings, music synced with commercials or TV shows, video game placements, sponsorship income, endorsement deals, online merchandise? There are many ways to monetize music today, but if you aren’t organizing and keeping track of each bucket, a shocking amount of your income or potential income could slip through the cracks.
- Know where your money is going.
Do you have an investment strategy? Is someone managing your money for you or are you doing it yourself? A diversified portfolio is important, as key asset classes will fluctuate over time, and proper asset allocation drives over 80% of your investment portfolio’s performance. In many cases, the asset classes that are favorable right now will typically have shifted out of favor 2 years from now, so guided adjustments to your portfolio can help minimize how steep the “hills” feel on the investment roller-coaster ride.
Some important considerations regarding investing include:
- how much risk are you willing to take,
- how long you will invest before your money is needed,
- how taxes will impact your plan,
- how liquid/accessible you need your funds to be,
- the proper amount to have as an emergency fund, and
- the appropriate amount to reinvest back into your business and artistry.
Having an investment “sherpa” to guide you through the mountains and valleys can be crucial for safer passage through your investment landscape. It can also help alleviate the constant pressure for the next song or career move to have to be a hit so you’re not always on the precipice of “can I continue to do what I love?”
- Know you’re protected in case of an emergency.
Musicians seldom work a standard 40-hour work week, and many don’t get paid time off or employer-sponsored health insurance like professionals in other fields. That can create a feast-or-famine cycle, as artists often work hard at developing new music long before it leads to a more lucrative period of releasing and performing that material.
It’s important to have back-up funding “just-in-case” so that you have shock absorbers for a plan that takes those kinds of timelines into account. It’s similar to how skyscrapers are built in the San Francisco Bay area. Those skyscrapers are designed to not be completely rigid, but to actually sway a little to account for earthquakes. If they were too rigid, the buildings could collapse, but the ability to sway actually alleviates a lot of the stress on the buildings’ infrastructure so that it can absorb the tremors.
Similarly, we recommend building a “shock absorber” emergency fund that covers up to 6 months’ expenses. I can guarantee you that something will inevitably not go according to plan, either as a surprise expense or a unique opportunity that you’d like to be able to take advantage of when it is presented.
And what if you’re no longer able to work or perform like you can now? We have had clients who were guitarists with nearly incapacitating hand injuries, vocalists who have had extended vocal cord strain, or team members who have received challenging health diagnoses that interrupt their ability to earn an income. As we all get older, 70% of us will likely have an extended, multi-year health issue. Disability insurance, life insurance, and long-term care insurance are also important aspects of a healthy financial plan.
- Know who’s on your team.
Musicians are often surrounded by an assortment of partners, collaborators and advisors on both the creative side and the business side of their profession: producers, instrumentalists, songwriters, managers, attorneys, and label representatives. Sometimes artists need to seek the counsel of everyone on their team before making a major decision, and sometimes they need to be able to call their own shots, secure in the knowledge that everyone around them will support their choices.
Do you have a trusted “board of advisors” that you know has your best interest at heart? Think about your attorney, your accountant, your manager, your financial advisor. Have they ever talked with one another to align with your plans and each other’s abilities to execute them? Are there individuals or teams that you need to “hire” or “fire?” Do you have someone that can serve as your “chief of staff” or “air traffic controller” to ensure that everyone has the same goals and the same strategies to reach them? Can they also articulate the domino effects of decisions made? As I like to say, before we pull the string, let’s understand what it’s attached to…is it attached to the tripwire that can blow up everything you’ve been building, or does it release the parachute to give you a controlled landing?
These five pillars encompass dozens of more specific and nuanced tasks and decisions, but breaking them down into broad categories can help you get control of the big picture of your career and build financial resilience. Taking the time now to ask yourself these questions is crucial for future success. You may even discover you have some extra unclaimed income! My team at Forte Impact Advisors would be happy to answer any questions you may have.
Jeff Hammer is a registered representative of, and securities and investment advisory services offered through Hornor, Townsend & Kent, LLC (HTK), Registered Investment Adviser, Member FINRA/SIPC, 800-873-7637, www.htk.com. Forte Impact Advisors is unaffiliated with HTK. HTK does not offer tax or legal advice. Always consult a qualified adviser regarding your individual circumstances. For Educational Purposes Only – Not to be relied upon as financial, tax, or legal advice. Diversification and Asset allocation are strategies designed to help manage investment risk. It does not guarantee a profit or protect against investment loss in declining markets. 7877510RG_Apr27
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