New blog post: Recession strategies for musicians

[bassandbeyond]

Hey folks,

Still yakkin' away on my personal finance blog, there's plenty to talk about these days!

The latest entry has a few tips about coping with the downturn. Please add comments for any additional suggestions you can think of!

http://soundmusicsoundmoney.blogspot.com/

[BassChuck]

I don't know that there are any special things to do to get gigs in hard times. Getting gigs is hard work.

But, over the years IME I've found that during tough financial times the entertainment industry does OK. Sure the gig money might be down but there seems to be more interest in the general population about getting out and having a good time for little money. So, bar bands might just do fine. Traveling Broadway shows, not so much.

It's going to be an interesting New Year's Eve this time around.

[Phantopeth]

Thanks for the link bassandbeyond, I dig the blob; I'll definately be checking in on it from time to time. Personal finance has been a big interest to me of late, it's only too bad I wasn't this interested in such things 4 years ago.

Good points, BassChuck. I think it's about to start investing in 'liquor-backed securities'; something tells me the value of bourbon and other similar commodities will be on the rise in the coming months!

[bassandbeyond]

Originally Posted by Phantopeth

Thanks for the link bassandbeyond, I dig the blob

The blob!

Yeah, generating new gigs can be tough even when the economy's doing well, much less during a recession. Cutting your act down to fewer members can be one way to lower your price and get a competitive edge.....maybe it's time for me to join a blues trio?

[Ric5]

My strategy for this economy ...

I have been selling off my overpriced Rickenbackers ... and replacing them with resonably priced basses.

[MatticusMania]

I've finally come to the point of selling off gear I dont use so much.

[bassandbeyond]

Well, the problem with selling off gear right now is the same problem with trying to sell stocks right now.....nobody's buying!! I would suggest trying to cut back on your living expenses before having a fire sale on your precious basses. But you gotta do what you gotta do.

[seanm]

Originally Posted by Phantopeth

Good points, BassChuck. I think it's about to start investing in 'liquor-backed securities'; something tells me the value of bourbon and other similar commodities will be on the rise in the coming months!

I have been trying to do that for years. I buy some 'liquor-backed securities', and take just one sip to make sure it is not bad. Nothing worse than finding out your 'liquor-backed securities' are off.

Next thing you know, they are empty. I think the 'liquor-backed securities' evaporate once you open the bottle.

And in case you didn't notice, 'liquor-backed securities', is now one of my favorite phrases.

[capnsandwich]

I know that if you're a regularly gigging musician you can write your instruments off on your taxes. I met a guy who had many, many awesome basses but had a part time job at a music store. I asked him how in the world he paid for all those basses and he said that he writes them off as business expenses. I'm not sure how many gigs or how much money you need to earn as a musician before you're able to do that though but it seems like another way to save a few bucks during tax time, and own some nice gear.

[Dave Muscato]

The people who tend to spend the most money and time at bars and clubs are not the people most affected by the stock market craziness right now. Many of them are college students or young professionals who are far from retirement. Many are renters and are isolated from falling housing prices or foreclosures etc.

I think the price of commodities has a bigger effect on musicians' income than more esoteric things like what's going on now. When gas is expensive (and therefore food and everything that has to be trucked around), people are more likely to drink at home than go to a bar, and they're less likely to buy CDs or merch, etc. This is where musicians are hurt.

The 40-to-50-somethings who are freaking out about their 401k's and housing don't go to bars or buy a lot of CDs from working musicians, regardless of business cycles.

When times are bad, people flock to escapist entertainment like movie theaters, games, sports, music... You tend to see this more with high unemployment among younger people (below 30s or 40s), though, e.g. the Great Depression. We do not have that problem now (yet?). I think the people who are going to be hurt much more than musicians are, for example, jewelers, ski resorts, sellers of things like expensive furniture and furs or collectibles (like vintage instruments & amps), real estate agents, etc.

[Dave Muscato]

Originally Posted by capnsandwich

I know that if you're a regularly gigging musician you can write your instruments off on your taxes. I met a guy who had many, many awesome basses but had a part time job at a music store. I asked him how in the world he paid for all those basses and he said that he writes them off as business expenses. I'm not sure how many gigs or how much money you need to earn as a musician before you're able to do that though but it seems like another way to save a few bucks during tax time, and own some nice gear.

A write-off only lowers your taxable income base. You have to be earning a decent income and paying a lot of income tax in the first place before a write-off will do much for your bottom line or standard-of-living.

Are you saying that he wrote off the basses as a business expense of the music store, or on his personal income taxes?

Anybody who gigs even semi-regularly can write off his music gear (and also things like lessons, books, purchased CDs and downloads used to learn new material, mileage to & from gigs, computers/software, etc) if it's a legitimate cost of doing business as a musician. You don't have to work at a music store to do this.

[capnsandwich]

Originally Posted by Dave Muscato

A write-off only lowers your taxable income base. You have to be earning a decent income and paying a lot of income tax in the first place before a write-off will do much for your bottom line or standard-of-living.

Are you saying that he wrote off the basses as a business expense of the music store, or on his personal income taxes?

Anybody who gigs even semi-regularly can write off his music gear (and also things like lessons, books, purchased CDs and downloads used to learn new material, mileage to & from gigs, computers/software, etc) if it's a legitimate cost of doing business as a musician. You don't have to work at a music store to do this.

No, he wrote off his personal gear for his personal income taxes. The music store he worked at didn't have much for basses so most of his gear came from custom builders. He writes off everything he can, even mileage to gigs. He only gets maybe 15-20 hours a week in the store and most of that is lessons. Everything else he gets is from gigging, which he does no less than 3 times a week. He's a busy, busy man. I'm not sure how much he gets but he drives a Volvo wagon an sticks all his gear in the back. His wife drives a Volkswagon Beatle, one of the new ones. I think she works as an RN so most of the money comes from her. It may work if she makes around 50+ G's a year.

[bassandbeyond]

To be precise, U.S. musician independent contractors like your friend (and myself) can subtract business expenses like basses and mileage from gross income on their Schedule C forms. You don't have to be in a high tax bracket to benefit from this deduction, it's knocked right off of gross business revenue.

Lots of the customers at my gigs are in their 40's and 50's. And, I hate to say it, but even young working class folks without 401Ks or real estate will stop showing up at clubs once their employers lay them off. I'm sorry to say that nobody is going to come through this thing unscathed, but debt-free folks who have some savings will weather the storm better than those who don't. All of this stuff is discussed in my blog (I mean "blob"!).

[Dave Muscato]

To clarify, I was talking about that if you're in the 15% tax bracket and you make $20k/year as a musician, writing off $2k in business expenses only saves you $300; it's not like you're going to suddenly be able to afford "many, many awesome basses" working only part time simply because you write them off on your taxes... You have to have the income first, lol.

Originally Posted by capnsandwich

...I met a guy who had many, many awesome basses but had a part time job at a music store. I asked him how in the world he paid for all those basses and he said that he writes them off as business expenses....

Anyway, yeah, it does depend on the genre of music that you play and your target audience. If you're a wedding band and the bride's parents' interests are hit hard, you're more likely to lose the gig to a DJ during an economic downturn. If you're a touring rock band and gas prices and food prices drop significantly, you'll likely see an increase in your bottom line.

[fdeck]

Originally Posted by Dave Muscato

To clarify, I was talking about that if you're in the 15% tax bracket and you make $20k/year as a musician, writing off $2k in business expenses only saves you $300; it's not like you're going to suddenly be able to afford "many, many awesome basses" working only part time simply because you write them off on your taxes... You have to have the income first, lol.

This is a valuable and important point about tax planning: You have to do the math and figure out the actual impact on your taxes of any proposed scheme.

On the other hand, what capnsandwich suggests raises another useful point, which is that in these times it is a good idea to look for deductions that we have previously overlooked due to being careless or lazy. For me, it's logging the miles on my car.

[Dave Muscato]

Well, that's a good idea any time, but true: if you don't already deduct everything you should, definitely look into it.

[bassandbeyond]

Many good points being made by all here. Most musicians kind of live in more or less a state of "permanent recession" anyway. lol So we can always benefit from cutting costs and taking full advantage of business expense deductions. My mantra is "it's not what you earn, it's what you save".

[Dave Muscato]

I can speak to that. I make very little income (doing what I love), but I have enough in savings and investments to buy a small house. I'm 24, single, child-less, and completely debt-free. A friend of mine is a police officer; we were recently talking about this and although he makes 4 times what I do annually, he has only about 25% of what I do in savings and investments. He's my age, but whereas he drives a nice, nearly-new Mustang (with a nice, nearly-new loan, too); I drive a 9-year-old minivan. We are both single & child-less, but his rent is almost triple what mine is because he chooses to live alone in a nice apartment with a swimming pool and a gym etc and I have two roommates. My entire bass rig, which I use to make my living, cost less than his wristwatch. It's simply a matter of priorities. I will be able to retire before him, and with a higher standard of living, even counting his pension, at this rate.

It can be done; you just have to live below your means. I just put another $3500 into stocks this week; he said he would buy some stock while it's low, but he doesn't have any money (??). Dude makes 4 times what I do! lol

I disagree with half of what you said, though. It's both what you earn and what you save. If my income were to double, I wouldn't change my standard-of-living much if at all. I'd simply live on 40% of my income rather than 80%. That said, saving is worth more than more income, because of both taxes and compound interest.

[bassandbeyond]

Actually, I don't think we disagree at all. What I mean by "it's not what you earn, it's what you save" is that people in general, and musicians in particular, should focus more on the cost factor of the income-costs=savings equation. Of course more income is desirable! That goes without saying. But until one focuses on cutting costs, as you have done, savings tend not to happen, regardless of income level.

The story you related about your friend is a perfect example. Most people make the mistake of always thinking "if I could just earn another $10K a year, my financial problems would be solved". But then they take their eye off the cost factor, and lifestyle invariably goes up as fast or faster than income.

[depalm]

Recession strategies for musicians??

Well, I drink!