HOW TO KEEP YOUR FINANCIAL NEEDLE IN THE GROOVE
Djs, and the entertainment industry in general, do a great job of
amassing wealth by providing entertainment for their audience. Most
unfortunate, however, is the entertainment their audience receives when they learn of the outrageous ways artists blow through their wealth
in the pursuit of life and love. Fame, for most, is fleeting so here are some common mistakes of the suddenly successful.
Family, Friends and Money are a mix even Traktor can’t fix
While coming up, DJs must often rely of the assistance and guidance of family and friends who truly have good intentions. However, the obsequious entourage of “hangers-on” (which can include family and friends) poses the greatest threat to any entertainer’s wealth.
When money is flying, you can bet the vultures are too.Loyalties are leveraged: “Dude, hook me up” seemsbenign enough in the beginning. Guest list is the first expectation, followed by free drinks and more comps, followed by backstage demands and now everyone is somehow in the booth. It gets insidious quickly and soon the charlatan will emerge.
You know them already; they are very likely trusted members of you team or longtime friends. They may even mean well, but they will crush your bank account more perfectly than any mix you’ve ever done. The pitch is
always the same; an investment scheme or endorsing something they have a hefty stake in. You, my friend, are now at def con one. Do not EVER make money decisions unless you consult with an independent advisor.
Mixing up Managers, Financial Planners, and Advisors
The selection of a team is paramount to a successful career and essential to the ongoing maintenance of wealth for every DJ. Each team should contain a mix of general management, agents, lawyers, accountants, wealth managers, bankers, brokers, and independent financial advisors. Be sure the duties tasked to each professional is suitable given their expertise.
For example, your manager will coordinate your agent and your professional team but probably should not be making portfolio investment decisions for you. Your brokers and bankers will facilitate financial and real estate transactions but will need to do so with the guidance of your financial planner or advisor. Your accountant must be aware of EVERYTHING but will be most focused on your record keeping and your
taxes… Your lawyer should be very focused on your contracts and legal arrangements – this same lawyer, or perhaps an additional one should be structuring your estate (with the input from, or in coordination with, your financial advisor or planner.) *** if this just turned into Greek (but you don’t speak Greek) the first stop is a financial advisor, independent of the other professionals already on your team. Don’t exclude your current team. Instead, bring them along to ensure this new partner is a good fit and brings added value.
Being too optimistic about career longevity and earnings
It is of utmost importance to be realistic about how long you can or want to perform because this sets your investment tone. Not everyone can be a touring machine and earner like Carl Cox, so identifying and diversifying your revenue sources is a must. Production, endorsements and touring are prime money streams, but for how long? What if you couldn’t perform suddenly – Then what? You need a plan, and you need it now.
Outrageous spending
Let’s be honest with one another for just a minute. One of the perks is the lifestyle. However, when the lights come back on (and they should at least once and a while) there needs to be serious consideration to how much your lifestyle costs, and how sustainable… or not… it really
is.Congrats on your new studio! A testament to all that hard work. But, a million dollar console may not be the best investment (but it looks so cool and you really wanted it!) No. Step away from the Neve.Yes, we all need a mode of transportation but having a Ferrari in your stable is only fun when you’re home. And you never will be. Over indulging your “flavor of the month” with exotic rides or trips makes you feel successful, but it’s not going to end well. Money can’t buy you love. And, for the record, no one
wants to see you posing with your tiger.
Pay your taxes!!!
The list of entertainers driven into bankruptcy by not paying taxes is absurdly long. It is essential that your accountant be experienced in the entertainment industry and have a wide grasp of the tax implications to touring and performing artists. Foreign withholding is a big one, so be sure they are protecting you and the money you have earned. Your tax plan should include tax shelters; some of which can be incorporated into long term savings plans (which means you will keep much more of your earnings). Get creative, you can absolutely reduce your taxes, but you are never going to get rid of them.
The fact is that your career, earnings and future are never guaranteed. It is up to you to ask the right questions and employ trusted professionals in order to thrive. And remember, wealth isn’t just about how much you make, it’s about insuring your financial legacy long after your making’ days are gone.
James Beyersdorf is a personal CFO and principal at Financial Sherpa Inc. He has over 20 years of experience in wealth management, financial planning and investing. [email protected]
