“Would you trade four hours for $100,000?” That’s a question I recently asked a class of musicians. Most raised their hand. A few wanted to know what they’d have to do. “Nothing hard or illegal,” I assured. Then the ante was upped. “What about for a million dollars?” Suddenly all hands were reaching high in excitement.
What they didn’t expect—my question wasn’t simply theoretical. Four hours of time could actually lead to a million plus dollars. And the proposed activity is easy. Yet I suspect some of the students won’t be savvy enough to do what was suggested. At least not now. How about you?
Here’s the strategy: Read one book about personal finance.
As musicians, we work tirelessly to develop into outstanding artists. We practice hours each day, get (often multiple) college degrees, study privately, attend master classes, read trade books and magazines, and more. As a result of time and energy devoted over the years, we develop excellence in our field.
Mastering the money game is a lot like music. It takes education, practice, patience, discipline, and a clear plan.
Financial literacy doesn’t mean raking in piles of cash, or becoming filthy rich. (Many people and organizations command huge profits, but aren’t smart with their finances and wind up broke or worse. Just look at the current economic crisis!) It does mean that you have enough to survive, realize your dreams, and retire comfortably someday. Excellence requires attention to earning, spending, and saving. Short and long term planning are essential.
One critical rule about money is that your decisions today will have consequences (positive or negative) in the future. The sooner you begin to make smart choices with your dollars, the better off you will be. Someone who learns to become a master of money in their twenties will have more success than an individual who waits until their thirties…or forties…or fifties..or…yikes!
A good place to start is by reading one book about personal finance. Doing this will probably take around four hours to six hours. And the lessons you learn could result in one million dollars or more by retirement.
One of the students argued that while he’d like to have money, his time would be better spent practicing. “If you want an orchestra gig, you must devote 100% of your efforts to that,” was how he justified his outlook. Taking off even four hours was not an option.
First of all, I guarantee that everyone (even this student) could find four hours to read a book without affecting the results one way or the other of an audition he might theoretically take in several years. Secondly, even if he gets a great paying orchestra job, that doesn’t guarantee financial success. Once again, lots of people earn tons but spend more than they have and find themselves in the doghouse. Third, what if his great paying orchestra job doesn’t pan out? He may have a different financial profile than the one he now imagines. And finally, waiting to be smart about money, even five years, can have huge detrimental ramifications.
Here are a few money books I recommend, but there are many others. Read through the tables of contents to see which ones best match your needs and concerns.
1) The Money Book for the Young, Fabulous, and Broke, by Suze Orman. This book focuses specifically on people who graduate from college with mountains of debt and are greeted by a weak job market. Suze Orman is one of the most famous and accessible financial gurus around. She has a TV show on CNBC and appears frequently on Oprah, Larry King, and all kinds of other programs. Her approach to finances is conservative (i.e. don’t spend what you don’t have) and smart. Any of her books are recommended.
2) The Millionaire Next Door, by Thomas Stanley and William Danko. In this book, the authors show how many millionaires live well below their means. They don’t buy fancy cars or crazy mansions to impress others. Instead they make conservative, financially sound decisions that lead to financial independence.
3) The Automatic Millionaire, by David Bach. This is not a get rich quick book. It can, however, help you achieve financial independence in the long run. Bach suggests investing a fixed percentage of your income into retirement funds, and then living on the remainder of your salary. Many musicians who claim they don’t have enough money to save for the future spend $5+ a day on coffee and a muffin, cigarettes, eating out, or other non-essential activities. Bach calls this the Latte Factor. By investing that money instead, it can accumulate into large amounts over time.
4) Your Money or Your Life, by Joe Dominguez and Vicki Robin. What I love about this book is that it’s not just about accumulating as much greedy wealth as possible. Instead, it helps you establish a healthy relationship with your money. If a purchase doesn’t bring you true fulfillment, it’s probably not worthwhile. Though some of the text is a bit outdated, the basic premises are more relevant than ever.
5) The Savvy Musician, by David Cutler. This book, geared directly to musicians, has a full chapter devoted to personal finance. It’s a great primer to get you started.