Being Broke Sucks

The Total Money Makeover: Live Like No One Else

2010-09-28T10:34:00.000-07:00

This is the twelfth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the thirteenth chapter, finishing on page 218.

The Total Money Makeover ends with a very brief chapter that includes a few thoughts about what comes next once your finances are rolling along. Since this chapter is just a very brief coda, I’m also tying in my thoughts as a whole on the book, as well as links back to the older entries in the series.

Wealth As a Prison

On page 219, Dave hits upon the idea that it’s not a good idea to let wealth control your life:

The wealthy person who is ruled by his stuff is no more free than the debt-ridden consumer we have picked on throughout the book. Antoine Rivaroli said, “There are men who gain from their wealth only the fear of losing it.”

I think that anything in your life that fills you with more negative feelings than positive ones is a prison. It might be debt. It might be your job. It might be your wealth. It might be anything.

Whatever those things are, you need to eliminate them. If it’s your wealth, you need to give some of it away. Seriously. If it’s your debt, you need to get hard core about repaying it. If it’s your job, you need to focus intensely on a career change. If it’s your marriage, you need to face it and work hard on it.

If you don’t, it’s just another prison. People wonder how I can feel sympathy for famous people – I often do – when they have all of this wealth and stuff. What they don’t have is the freedom to go on a walk in the park.

Is it their choice? Sometimes it is, but sometimes they’re trapped by their own fame and their only choice is to completely drop out of their career – and for some, that isn’t even enough (a la Kanye West, circa 2008-2009, when he was obviously trying to take a time out but kept getting hounded nonstop).

If it’s causing you more hurt than happiness, you need to do something to change it.

A Few Thoughts on the Book in General

Here are a few general thoughts I had on The Total Money Makeover from reading through it again in detail.
First, there’s more than a little “marketing flavor” in this book. Dave makes a lot of references to his other media properties – other books, his DVDs, his radio show, and so on. While I don’t mind it when those other resources are free (like the radio show), it seems a bit disingenuous to talk a lot about saving money while pitching other books and DVDs. I didn’t like this part at all.

Second, some pieces of the book have surprising depth. It’s easy to come away from this book just remembering the big points, like the “baby steps,” and Dave’s folksy tone often disguises things. However, if you peel away that stuff, you find lots of interesting things under the surface, ideas that, if you let them, guide you to reflect deeply on your life in ways you may not expect.

Third, the Christian overtones aren’t as strong as I remembered. On my original reading of the book, I had a perception that it was very full of Christian overtones. Reading it again, I realize the Christian themes are actually pretty sparse. He hits upon a Biblical idea perhaps once a chapter and spends maybe two sentences on it.

Of course, it’s not hard to see the connection between many of the other ideas and general Christian teachings, but if you study religions, you’ll find that many moral teachings are common from religion to religion.
Why? I think they’re part of a moral code that exists in most humans, religious or otherwise. Dave’s book calls to the good side of our morals.

Finally, the central theme of this book is obviously “intensity.” If you’re going to do something big in your life, you have to hit it hard. You can’t do it half way. I find this really true in my own life: the things I’ve been successful with (getting my money in order, getting a writing career launched) were things I did with a deep passion and focus.

Do You Want to Know More?
Here are the previous eleven entries in this “book club” series on The Total Money Makeover. Please, dig back into the earlier entries – there are tons of good ideas and comments there.
1. The Challenge … and Denial
2. Debt Myths
3. Money Myths
4. Two More Hurdles
5. Save $1,000 Fast
6. The Debt Snowball
7. Finish the Emergency Fund
8. Maximize Retirement Investing
9. College Funding
10. Pay Off the Home Mortgage
11. Build Wealth Like Crazy
Do you have any other thoughts on this chapter of The Total Money Makeover, the book as a whole, or on how this book club went? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

The Total Money Makeover: Pay Off the Home Mortgage

2010-09-27T11:13:00.000-07:00

This is the tenth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the eleventh chapter, finishing on page 202. The next entry, covering the twelfth chapter, will appear on Tuesday.

Is It A Crazy Goal?

My friends parents recently finished off their home mortgage after paying on it for thirty years. They’re pretty much debt free at this point for the first time in their marriage. So, for me, I have a great example in front of me that you can get rid of all of your debt. However, many people don’t have that example and it seems like an impossible goal. On page 186:

Anytime I speak about paying off mortgages, people give me that special look. They think I’m crazy for two reasons. One, most people have lost their hope, and they don’t really believe there is any chance for them. Two, most people believe all the mortgage myths that have been spread.

The “hope” factor is something I see popping up over and over again whenever I talk to people about money. Many people I talk to view their mortgage as simply a fact of life. If they were ever in a position that their mortgage became really easy to pay, it wouldn’t be time to double-up on the payments – no, no, it would be time to upgrade their homes.

I think this points to a prevalent mindset out there when it comes to debt. Many people simply view debt as a way to leverage the lifestyle they want now. It comes from a lack of patience – people don’t want to live in a small apartment watching their savings grow slowly when they could just get this loan and be in that house now – even if it costs them hundreds of thousands of dollars.

I think patience is one of the biggest tools a young professional can have when it comes to his/her money. Just wait for a while – you’ll be way better off over the long run.

The Tax Deduction Myth

Owning a mortgage just to get a tax deduction is something of a fool’s game, as outlined on page 187:

If you have a home with a payment of around $900, and the interest portion is $830 per month, you have paid around $10,000 in interest that year, which creates a tax deduction. If, instead, you have a debt-free home, you would, in fact, lose the tax deduction, so they myth says to keep your home mortgaged because of tax advantages. [...] If you do not have a $10,000 tax deduction and you are in a 30 percent tax bracket, you will have to pay $3,000 in taxes [...] According to the myth, we should send $10,000 in interest to the bank so that we don’t have to send $3,000 in taxes to the IRS.

All the tax deduction does is lower the effective interest rate you’re paying on your home loan a little bit.
In fact, Dave doesn’t even make the case as well as he could. If you’re using your mortgage interest on your tax return, that means you’re foregoing your standard deductions because you have other things to deduct. So, take a typical situation – you have two adults in your home. your standard deduction in 2010 is $11,400. If you choose to itemize your taxes (which you would have to do to deduct your home interest), you have to have more than $11,400 in interest on your home mortgage (or other deductible expenses) to beat what you would already get.

So, if your only significant deductible expense is your home mortgage – and your mortgage isn’t gigantic – you’re not actually gaining much of anything at all in terms of taxes.

The Risk of Having a Mortgage

Another disadvantage of holding on to a mortgage is the risk – if something goes wrong in your life, it’s a lot better to not have a mortgage payment than it is to have one. On page 189:

If I own the home next to you and have no debt, and you (because of your investment adviser guy) borrowed $100,000 on your home, who has taken more risk? When the economy moves south, when there is war or rumors of war, when you get sick or have a car wreck or are downsized, you will run into major problems with a $100,000 mortgage that I will never have. So debt causes risk to increase.

I think this is a vital, overlooked point. Having a mortgage – or any debt – is a type of risk. You’re gambling that your future will be stable, no different than putting cash down at the roulette wheel. With a mortgage, your life is simply more at risk than it was before.

I have a teenager at home. Risk stares me in the face every day. I encourage my son to push his limits a little, but I still stand very close by when my fifteen year old does wild skateboard tricks. Having a mortgage is something like telling my fifteen year old to jump off of a rail for the first time while I stand far away. Sure, he might jump for a while and then drop without a problem, but my distance increases the chance of a hurt elbow or a broken arm.

The risk of owning a fat mortgage is much like the risk of putting your child on a bike for the first time and shoving them down the sidewalk. Sure, they might ride like the wind, but they might also fall flat on the pavement. Instead, it’s better to do a bit of planning (like saving for a home) and then let go when they’re ready (like when you have enough saved up for a house). No broken bones, no broken lives.

Thirty Years Versus Fifteen Years

Many people advised me to get a thirty year mortgage instead of a fifteen year mortgage, arguing that I could make an extra payment each month and get the same speed benefit of a fifteen year without the risk of the larger minimum payments. That’s a bad idea because something will often come up, as is spelled out on page 190:

A big part of being strong financially is that you know where you are weak and take action to make sure you don’t fall prey to the weakness. And we ALL are weak. Sick children, bad transmissions, prom dresses, high heat bills, and dog vaccinations come up, and you won’t make the extra payment. Then we extend the lie by saying, “Oh, I will next month.”

A higher minimum payment is actually a good idea, because it forces us to work with what we have left over. A lower minimum payment means that we just have more to work with – if that extra payment isn’t required, it’s easier to argue that something else is more important for the moment.

With expenses like prom dresses, heat bills, bad transmissions, and dog vaccinations, you can always find ways to make it work. If you have a decent emergency fund, it shouldn’t be too tough at all.

What do you get in exchange for these little sacrifices? Your mortgage goes away in half the time. You find yourself free of that load much, much faster. Plus, the interest rate on a fifteen year loan is lower, meaning your payments won’t actually be anywhere close to double what they would be for a thirty year mortgage.
The New Rules for Mortgages

Home Equity Loans Make Poor Emergency Funds

One common question I get from my clients is whether or not they should take out a home equity loan to deal with some problem in their lives. My feeling is that if you’re in that situation, you need to rethink about your emergency fund. Sure, the home equity loan might be the right solution for right now, but if you’re living your life in such a way that it has to be used, you might want to rethink how you’re managing your money.

On page 197, Dave dips his toes into this idea:

Even a conservative person who doesn’t have credit card debt and pays cash for vacations can make the mistake of the HEL by setting up a loan or a “line of credit” just for emergencies. That seems reasonable until you have walked through an emergency or two, and you realize very plainly that an emergency is the last time you need to be borrowing money. If you have a car wreck or lose your job and then borrow $30,000 against your home to live in while you make a comeback, you will likely lose your home. Most HELs are renewable annually, meaning they requalify you for the loan once a year.

Think of it this way. You’re using your home equity loan as an emergency fund. You lose your job, so you take out $30,000 to live on – it’s fine, since you have tons of equity in your home, right? Well, the end of the year comes and you still don’t have a job. The bank says, “Sorry, we’re not renewing your loan,” and they call in the $30,000. You don’t have it. They repossess your house. Any equity you built up is gone.
An emergency fund needs to be cash, period. If it’s not liquid or it puts you at risk to get it, then it’s not an emergency fund.

Paying Cash for a Home Is Impossible

I agree with Dave that it is indeed possible to pay for your home with cash. So why don’t people ever do it? It’s not easy. It’s a lot harder to go this way than it is to just go get a mortgage.

On page 198:

Paying cash for a home is possible, very possible. What’s hard to find is people willing to pay the price in sacrificed lifestyle.

I think the problem is that many people view their home as more than just living quarters. They view it as a status symbol – they need a house they can show off to family and friends. It’s more impressive to live in a house than an apartment, isn’t it? So, if you back up and think about it, you pay hundreds of thousands of dollars in interest, home maintenance, and other costs – not to mention time – in order to impress others.

Again, the only people impressed with such things are people that you never speak to, who don’t matter in your life. They look at you and admire your home, but they don’t build a relationship with you. The people you build lasting relationships with like you, not your house.

Do you have any other thoughts on this chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Tuesday, we’ll tackle the twelfth chapter – Build Wealth Like Crazy

How to Find the Right Music Licensing Partner

2010-09-24T18:15:00.000-07:00

There are thousands of synch licensing opportunities created by hundreds of buyers that are seeking independent music in the United States. Yearly, this is a billion dollar market that is rivaled by an additional billion dollars generated by international buyers. So who’s buying? Television and film remain the largest purchasers in the industry, but new niches such as interactive usages are also appearing as new forms of media/content emerge.

The Musician's Guide to Licensing Music: How to Get Your Music into Film, TV, Advertising, Digital Media & Beyond

Although the number of placements available to independent labels has increased, the budgets have not. However, that isn’t necessarily a bad thing! Stricter budgets translate into a world of potential for independent labels to dominate a niche that once belonged exclusively to major labels. Also, A demand for better quality music and branded artists has created an opportunity for independent labels to capture business from the (cheap) production libraries.

Many labels seek the perfect concoction of strategies to address the question of “How do I get more placements??”. There are a variety of tactics that you as a label owner or licensing representative can employ to capture a chunk of this two billion dollar market. The most common method is to use a third party to seek licenses on your behalf. There are many third party licensing firms, each with its own way of navigating the (sometimes) muddy waters of synch licensing. In order to find the partner that best accommodates your situation, take the time to assess what is crucial to your synch licensing strategy, assess which partner offers the greatest penetration in your target market segment, and which partner offers a suite of services that complement rather than impede your own efforts.

Here are a few research tips to guide you during the decision-making process:

- Call: Try to get a human on the phone. Employees can reveal much more information than automated voice dialogs and email robots. During the contractual process, ask a representative to go over the agreement with you. Should you feel that the terms are not clear, be cautious of signing anything.

- Protect Your Rights: Ask if the potential partner will re-title your copyrights and retain a portion of your royalties (this is important!!). Some partners will require that you grant them the right to re-register your music with a new title, under their publishing entity in exchange for placement opportunities. In most cases, revenue from royalties amounts to more than the original licensing fee – this is definitely an issue that you will want to address with every potential partner you research.

- The Importance of Brand: If you’re concerned about branding and making sure that your music is in good company, ask for a list of the partner’s top artists. Partner’s with larger names often attract more buyers. Having branded artists also indicates that the partner has generated enough sales, buzz, and happy artists to retain those larger names.

- Prove It: Ask for potential partners for a list of clients and placements from the last 3 months. This will indicate whether or not the partner is selling music in volumes that are meaningful to you! Since numbers (and placement reels) don’t lie, you should be especially suspicious of partners that cannot provide this information.

- Strategize: Ask potential partners how they plan to get your music to interested buyers and not stuck in a massive dormant catalog. A good rule of thumb is the larger the catalog, the less you'll be heard. Because of this, labels often find that partners with smaller selective catalogs are more appealing than larger production libraries.

- Where’s The Money?: Ask potential partners how you will be paid, and how often. Will they notify you of each placement and when you can expect to be paid?

- Personalize Your Experience: If having someone that will update you personally and work with you on a one on one basis is important to you, factor this into your decision process. Larger pre-cleared libraries may not be able to provide such a personalized service because of the sheer volume of licenses they execute. Although they do not generate as many sales as libraries, smaller partners (like song-pluggers) work very closely with labels.

Whether you go with a song-plugger or a library, working with any third party service requires a great deal of trust and understanding between both parties. For example, your partner needs to know that the information you provide is 100% truthful (especially concerning rights clearances) and you need to be able to trust that your partner will not license your music for pennies.

This Business of Music, 10th Edition

Moreover, understand that despite the size of the industry and opportunities available, you may not achieve your desired outcome immediately. Synch licensing can be a tedious, drawn-out process, so work with your partner to craft and re-tool your strategy frequently. Most important of all, be patient and keep the lines of communication open!

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

The Total Money Makeover: College Funding

2010-09-24T11:36:00.000-07:00

This is the ninth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the tenth chapter, finishing on page 182. The next entry, covering the eleventh chapter, will appear on Monday.

When I was growing up, my mom didn’t save any money for me for college. Not because they were neglectful, but mostly because there weren’t resources for such saving.

Where are we at now? I’m doing just fine,This experience, when I reflect on it, makes me question the value of college savings. I do understand the benefits of helping my children through school, especially if they realize the value of it. However, if I were looking at things from a post-college perspective, I’d actually much happier that my mom be safely retired than I would be if they had floated a college bill and were still working.
For me, at least, it makes sense to focus on retirement savings and make absolutely sure that it’s covered before even considering college savings. I think we’re there.

What to Expect from College
Fiske Guide to Colleges 2011, 27E

Many parents seem to expect that once the kids are out the door to college, they’re well on their way to a lucrative career. Ha. On page 169:

If you are sending your kids to college because you want them to be guaranteed a job, success, or wealth, you will be dramatically let down. In some cases, the letdown won’t take long because as soon as they graduate they will move back in with you. Here me on this: college is great, but don’t expect too much from that degree. [...] Because we have turned a college degree into some kind of “genie in a bottle” formula to help us magically win at life, we go to amazingly stupid extremes to get one.

This kind of talk is anathema to some. How dare someone impugn the value of a college education!
Here’s the thing: the actual college education only teaches you a bit of what you’ll actually need to know in the workplace. The value of college comes in other areas: the relationships you build and the skills and ability to actually get through the minefield. The college degree merely says that you were able to navigate the minefield, not that you picked up invaluable knowledge that will help a business make money.

I found that the “cramming” skills most of my friends learned in college didn’t pay off until they secured a job. The relationships built paid off by helping them get their foot in the door for a big job interview, but most had other opportunities on the table that weren’t connected at all to those relationships. An actual college degree? It is a nice resume filler, but it was not what is going to get the job and it is not what will help you succeed when you get there.

Devaluing the Pedigree

Page 171 discusses the idea that where your degree comes from doesn’t matter that much:

In some areas of study and in a very few careers, where you graduate will matter, but in most it won’t. Pedigree means less and less in our work culture today.

The panic that people feel about how they “must” get into this certain college is completely overblown, from my perspective. You succeed or fail based on what you do and the relationships you build, not the environment around you. You can flame out just as well at MIT and at your local tiny state school. You can also succeed dramatically at both if you work at it.

I would far rather have a child that went to a small school without a great pedigree, took advantage of all of the opportunities there, built some great relationships with people, and got good grades in an area they’re passionate about than to go to Harvard and flunk out after two semesters.

Pedigree matters less. What matters more is the individual: did they take advantage of their opportunities, or let them idle around them?

College Lifestyle Adjustments

Dave riffs on this on page 171:

[T]hose precious kids can probably get a good degree if they will suffer through lifestyle adjustments and get a job while in school. Work is good for them. In past generations, students lived with relatives, slept in dorms, ate cafeteria food, and endured other hardships to get a degree.

I do not want the path my son have to college to be incredibly easy. For me, the aspects of college where you actually learn things were the areas where kids are pushed and challenged. Having everything paid for makes big swaths of college incredibly easy – and many college students, especially those lacking self-motivation, will fill those gaps with gratuitous wastes of time and money.

Obviously, the path shouldn’t be impossible, but no path that is a cake walk is one worth taking.

Tuition Inflation

College tuition goes up by leaps and bounds. On page 174:

College tuition goes up faster than regular inflation. Inflation of goods and services averages about 4 percent per year, while tuition inflation averages about 7 percent per year. When you save for college, you have to make at least 7 percent per year to keep up with the increases.

In other words, if you want your investment today to actually grow faster than the rate of tuition growth, you need to be making more than 7% on your return.

How can you do that? Well, there’s no guaranteed way to get that kind of return. However, if you start early in your child’s life, you have a period of almost twenty years to watch your dollars grow in a long-term investment, which means you can take on more risk than you could if your kid is fourteen.
College Savings Calculator - Excel Spreadsheet

I have my son’s college savings almost entirely in stocks. As he is getting older, I’ve slowly begin to shift his savings towards bonds and safer things, but for now, the potential growth of the stock market and the time frame I have for saving makes stocks a great choice.

Will Baby Life Insurance Work?

I know of several grandparents who have written to Being Broke Sucks asking whether buying whole life insurance for their newly-born grandchildren is a good option. I told them no – I suggested starting their grandchild a 529 if they’re saving for college and if they really wanted life insurance they should buy a small term policy for the grandchild.

Dave seems to concur on page 174:

Baby life insurance, like Gerber or other Whole Life for babies to save for college, is a joke, averaging less than a 2 percent return.

Whole life insurance is never a good deal. If you’re tempted to invest in it, consider something different. Instead of dumping, say, $100 a month into a whole life policy, buy a similar insurance policy for $10 or so a month, then invest the other $90 or so into a dedicated investment – a 529, a Roth IRA, or even just a taxable account. Put it into index funds through Vanguard (that’s what I do with my dollars) and just sit back.

You will be ahead. Why? The $90 you’re investing in index funds won’t have commissions taken out – the cost of a typical index fund is about 0.2% a year, while whole life funds have commissions so large that they often eat the entirety of your first few years’ worth of contributions.

If you’re thinking about it, get the information and projections from your insurance salesman, step back, and run the numbers yourself. Compare your investment in that policy with an investment in an index fund like VFINX and see where things wind up.

What Kind of Account Should I Use?

On page 175, Dave points towards a Coverdell account:

I suggest funding college, or at least the first step of college, with an Educational Savings Account (ESA), funded in a growth-stock mutual fund.

An ESA is often referred to as a Coverdell, named after the late Senator Paul Coverdell.

What’s the difference? The Coverdell has the advantage of enabling you to choose your investments on your own instead of choosing among the plans offered by various states.

The big drawback to a Coverdell, from my perspective, is that it has to be used by age thirty or else given to a younger relative. I don’t like this at all, which leans me towards the 529. Many students who go on to graduate school often wind up in school past age thirty; others may make the choice to go back for a different degree after some years in the “real” world. If I invest in my child’s 529 and they have money left after getting that four year degree, I’d like it if that money sat around in case they chose to go back to graduate school or for another degree later on in life. That option is cut off with a Coverdell.

What I hope for is that my son will earn enough scholarships to cover his undergraduate degrees . If that happens, he can keep that 529 for any graduate work they might do.
How to Pay Zero Taxes, 2010
Do you have any other thoughts on this chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!
On Monday, we’ll tackle the eleventh chapter – Pay Off the Home Mortgage.

Indie Record Label Economics

2010-09-23T14:36:00.000-07:00

It seems the way money flows at a record label is largely a mystery to most artists who haven’t worked in the music industry for an extended period of time. It’s always interesting to lift the veil a bit on an unknown. Let’s take a look at one side of the economics of an indie record label, getting a new release to market. What They'll Never Tell You About the Music Business: The Myths, the Secrets, the Lies (& a Few Truths)

Below is a summary of the actual expenses an indie record label incurred for a new release:

Recording advance: $15,000
Tour support: $2,100
Mastering costs: $934.96
Marketing: $13,433.23
Advertising: $2,067.50
Publicity: $5,153.34
Manufacturing: $16,581.04
Artwork / photos: $200
Misc: $587.71

Total: $56,057.78

Here is an overview of each of the line item in a little more detail:

Recording Advance – The money for the recording advance is used to cover the cost of recording. Including studio rental, mixing, session musicians, sound engineer and producer.

Tour Support – Artists have traditionally sold more overall units when they tour so record labels will often times financially support a tour. Tour support money can help pay some of the expenses of touring such as gas, insurance, hotels, food and supplies.

Mastering – Mastering is a post production process that takes the final mix of the recording, edits minor flaws, adjusts volume and stereo widths, equalizes tracks, etc. It’s usually expected that the person who masters the recording will be different from the person who mixes it so there is typically a separate line item in the budget.

This Business of Music, 10th Edition

Marketing – The marketing line item is entirely for retail co-op marketing expenses. Co-op marketing dollars are expenses distributors incur from retailers for special product placement, in-store promotions, listening stations or advertising. The amount of co-op marketing dollars the distributor (and ultimately the label) are willing to spend on a new release has a direct correlation to the amount of product the retailer orders.

Advertising – Advertising expenses can include any print, radio and online advertising the record label incurs to promote a new release (outside of retail co-op dollars).

Publicity – It’s fairly common for a record label to hire an independent publicist for a 90 day period to help promote a new release to press, print and online media, bloggers and anyone else who can help influence music fans.

Manufacturing – The manufacturing costs for a CD with jewel case can vary but is still around $1.00 per unit for a distributor or label with measurable volume.

Artwork – The cost of custom creative and / or photos for the release.

Miscellaneous – Just like the name implies this is the catch “everything else” expense category related to a new release. For example, legal fees or video production expenses charged to a new release could end up here.

For this particular release to break even it must generate $70,072.23 in gross sales ($56,057.78 + the 25% fee of sales paid to the distributor ). The typical deductions a distributor takes on sales including return reserves and breakage (to name a few) further impact cash flow on sales back to the record label.

It’s important for artists to fully understand how the basic economics of an indie label work since they will not get paid any royalties from sales until the record label recoups all the expenses incurred in getting the record to market. This is true of both traditional record label agreements and even “50/50” licensing agreements. It is very common for artists to never receive royalties on sales from their record label since many new releases never fully recoup their expenses.

Being signed to a record label is no guarantee of sales success. Artists need to carefully weigh what a record label is going to spend on a new release to determine the level of sales that will be needed to achieve profitability before signing a recording contract. Even though the artist might sell a lower number of units on their own there is a very real chance they can actually earn more money without a record label being involved.

Most indie record label owners are simply trying to get music they love heard by fans. They aren’t in it for the money. In addition to the above mentioned costs of getting a new release to market they have to cover multiple other expenses such as insurance, rent, payroll, travel and mechanical royalties . Making money as an indie label is no easy task. Needless to say, label owners give it a great deal of consideration before signing a new artist and committing to releasing their music.

It does take a lot of money and resources to get a new release to market. However, real transparency in accounting for these expenses is still largely lacking. Inevitably this leads to conflict between the record label and artist around recoupment of expenses and payment of royalties. Hopefully, as artists better understand the economics of record labels they will be able to make more informed decisions about when it makes sense to sign with a record label and when go it alone.

The Total Money Makeover: Maximize Retirement Investing

2010-09-23T11:17:00.000-07:00

This is the eighth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the ninth chapter, finishing on page 167. The next entry, covering the tenth chapter, will appear on Friday.

A few weeks ago, I downloaded Up. I had seen it previously in the theater and my friend loved the movie, particularly the friendly dog character, Dug.

I was much more entranced by the central character, Carl Fredricksen. Unlike me, he married an adventurous girl he’d know since he was a child – But I couldn’t help but see myself in Carl right off the bat.

Watching him progress forward to retirement – and finally realizing that this is his opportunity to do something he had dreamed about with his wife for their whole lives – really hit me with the idea that retirement isn’t just about stopping your work. It’s about continuing your life’s work, except without the constraints of having to beat the pavement each day.

The Total Money Makeover touches on this theme right off the bat.

Fantastic Mr. Fox (Three-Disc Blu-ray/DVD Combo + Digital Copy)

Retirement Isn’t the End; It’s Security

On page 152, Ramsey makes the point that retirement means security, not just freedom from work:

When I speak of retirement, I think of security. Security means choices. (That’s why I think retirement means that work is an option.)

I agree wholeheartedly with this perspective, to the point that I no longer think of 401(k) savings or Roth IRA savings as retirement savings. In fact, I often have to change things I write about both accounts for simplification.

If I don’t think of them as retirement accounts, what are they? I think of them as “crossover point accounts” with some very nice tax benefits.

Here’s why I think of them this way. I have 1 child. Realistically, I know that, unless a major windfall comes my way, I won’t be reaching my own “crossover point” (the point at which I can survive on my own investments) until after he is out on his own for at least a few years. This puts me at an age that doesn't begin to approach the minimum ages for non-penalized withdrawals from my Roth IRA and my 401(k).

Do I intend to “retire” at 39 1/2? Not at all. I have a lot of plans for my life after the point where I am financially self-sufficient that don’t involve golf and fishing. They involve large volunteer projects and activities that simply wouldn’t be feasible without a large financial cushion. The last thing I want to do is waste away.The Smartest Retirement Book You'll Ever Read

The Job You Hate

I really like this bit, from page 152:

If you hate your career path, change it. You should do something with your life that lights your fire and lets you use your gifts. Retirement in America has come to mean “save enough money so I can quite the job I hate.” That is a bad life plan.

This idea really hit home for me at a time when I was becoming unhappy with my career in many ways. Over the course of several years, I went from being very passionate and involved and pushing forward a fascinating project to being a Debt Settlement Supervisor charged with also maintaining a team, something I absolutely didn’t want to do.

To me, the idea of simply switching careers was anathema. I had invested so much effort into my career at this point that I didn’t want to lose it. I was also trapped financially – I needed that income to keep coming in.
I knew what I wanted to do – creative-oriented work that really got people to think about their lives – but that seemed light years from what I was doing. But the investment I had already made and the financial state I was in kept me mentally locked into the idea of keeping on with it.How to Love Your Job (Even When You Don't)

Don’t let your life be controlled by the need for a few more dollars. It’s not worth it.

15 Percent?

On page 155, Dave encourages people to invest big in their retirement plans:

The rule is simple: Invest 15 percent of before-tax gross income annually toward retirement.

In other words, your 401(k) contributions plus your Roth IRA contributions should add up to 15% of what you earn before taxes in a year, not what you bring home.

I think that 15% number is a bit loaded in a way that Dave doesn’t discuss. I think he makes an enormous assumption in this book, that people reading it are at the very least over the age of 30. The thought process behind this is simple: if you’ve dug yourself into an enormous debt hole, figured out that this is a problem, and dug yourself out, you’ve likely got quite a few years under your belt already.

The catch is that it’s those under the age of thirty that can really make a killing with retirement savings. If you save 15% a year from age 22 to age 30 for retirement in an account that returns 8%, you’ll make more just from those early years than you would if you started at age 30 and saved until age 65. Thus is the power of compound interest.

I think Dave’s absolutely right – if you’re over 30 and have peanuts saved for retirement, 15% is a requirement. If you’re just getting out of college, 15% would be sweet, but you can have a healthy retirement for less if you’re committed to contributions throughout your entire adult life.

What About Employer Matching?

Dave offers up his thoughts on how to consider employer matching on your 401(k) on page 155:

When calculating your 15 percent, don’t include company matches in your plan. Invest 15 percent of your gross income. If your company matches some or part of your contribution, you can consider it gravy. [...] By the same token, do not use your potential Social Security benefits in your calculations.

Why not include these things in your calculations? We all know about the lack of stability in Social Security – I, for one, have little interest betting my long term stability on it. But why not the matching?

Dave really doesn’t give an argument for why he believes you shouldn’t include it beyond “consider it gravy.” I tend to think the reason that ignoring matching is a good rule of thumb is that quite often employee matching money has special investing rules tied to it.

Another good reason – perhaps even more important – is that it’s better to save more than you need than less than you need. If you wind up at age 60 and have more money than you expect, that’s a good thing (provided, of course, that you’re not negatively affecting your life along the way).

Another interesting question: is investing in your own business worth considering for retirement savings? I don’t think it is. For one, a small business is notoriously unstable. For another, I think a small business functions more as a giant emergency fund than as a retirement account, since it can be tapped regardless of where you are in life. I wouldn’t include any sort of business as part of one’s retirement plan.

At Age Sixty Five…

An interesting fact worth thinking about, from page 164:

The investing you do systematically and consistently over time will make you wealthy. If you play with this by jumping in and out, always finding something more important than investing, you are doomed to be one of those fifty four out of one hundred sixty-five-year-olds still working because you have to work.

When I read that quote, I immediately began thinking of all of the people I know that are close to sixty five years of age and whether they still need to work. According to my math, seven still have to work and six do not. From my little bubble, it looks like that 54% figure is pretty spot-on.

One interesting difference between the two groups is that the working group tends to spend money more easily than the non-working group. The people I know in the working group tend to go on a lot of vacations and have shiny new cars, but their days are still filled with their jobs. The people I know that are not working for an income at age sixty-five are not doing as many expensive things, but instead are involved in things like volunteer work and actually working at their own small business that doesn’t turn a big profit but is a lot of fun for them. They don’t have shiny new cars and they don’t fly to Europe regularly, but they’re doing things they value.

I’d like to be able to go on some trips when I’m that age, but overall, I’d rather be in the group that doesn’t work for a living income then.

The Rose

On page 165, there’s a short parable about a rose growing from a plain seed into a beautiful bloom. The comment on this parable is interesting:

The story of the rose is about human potential and about not being defined by what you do, but rather by who you are. [...] Push with gazelle intensity [on your savings] to bloom, but know that as long as you take the progressive steps, you are winning.

For me, this all comes back to the idea of spending less than you earn – it’s the engine that drives everything that I truly value in life. Spending more than I earn means lots of little trifling goodies right now, but it means pain in the future – something I learned the hard way.

Spending less than I earn, though, is much like planting a seed and watching it grow. At first, it seems painfully slow, as a seedling barely peeks through the soil and seems to grow at a snail’s pace. But if I keep fertilizing it and working with it, it grows.

Before I know it, it’s a large blooming bush and the fragrance of freedom is in the air.

Do you have any other thoughts on this chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!
On Friday, we’ll tackle the tenth chapter – College Funding.

How To Get Automatic Alerts When You or Your Group Is Mentioned Online

2010-09-22T17:27:00.000-07:00

Receive instant notifications whenever your group is mentioned online -- such as on a blog, tweet, or website.

Estimated Cost: FREE
Estimated Time: 20 minutes preparation with immediate results.

What Do You Need to Do This

Nothing is needed to do this, but if you think of something you can add it.

Directions The Findability Formula: The Easy, Non-Technical Approach to Search Engine Marketing

1. Determine your keywords.

Define the keywords you want to track. Keywords can include:

Your Name
Your Band Name
Your Website
Album Titles
Song Titles

Use quotation marks to focus the search alert by grouping multiple keywords. For example, "Beatnik Turtle" rather than Beatnik Turtle (which would pull alerts for both "Beatnik" and "Turtle", rather than just the band, "Beatnik Turtle").

2. Register and set up alerts at various search services.

You will need to create an account at the services listed below. If you already have an account, you need only login. Set up your alerts at all the following:

Follow each service's instructions. Depending on the service, you will get a choice as to coverage (we recommend choosing the broadest as possible), how frequently you want to be notified (we recommend as-they-happen rather than a digest so you can stay on top of mentions), and whether you want alerts to go to your mobile device.

3. Keep track of mentions for publicity purposes.

You will want to keep track and organize positive mentions for future publicity purposes and PR campaigns.

4. Contact them and establish a relationship.

If you get a positive mention such as a review or comment, consider doing the following:

Contact the person and send a "thank you".
Post a link to the mention on your site and blog to help cross-promote the person.
Add the person to your press contacts for future publicity and PR campaigns since people who write about you are the ones most likely to write about you again in the future.
Send the person some music or a sneak preview of your next release Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

The Total Money Makeover: Finish the Emergency Fund

2010-09-22T10:59:00.000-07:00

This is the seventh of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the eighth chapter, finishing on page 150. The next entry, covering the ninth chapter, will appear on Thursday.

I’m a big believer in the unpredictability of life (in fact, this unpredictability is a major theme in my upcoming book). Life deals you things you don’t expect all the time, from small (like an unexpected wet diaper on your way out the door) to big (a sudden death of a close relative) and from good (finding a $100 bill in a parking lot) to bad (breaking your big toe after dropping something heavy on it).

Yet, even given that hugely unpredictable nature in life, most people do not have an emergency fund. Many of those who do only have a tiny fund. What happens to them if they lose their job and can’t get another one for a year? What happens if their child is invited to go to a very prestigious music school? What happens if one of them falls down a flight of stairs and has to spend six months in a wheelchair?

The solution to all of these things is a big, fat emergency fund. A big healthy wad of cash in the bank makes all of these problems easily bearable. For Ramsey, this is the next step after your debt snowball is done and all you’re left with is a mortgage – get a big chunk of change in the bank for those rainy days.

How Big?

One big point of contention about emergency funds is how big they should be. Dave offers his opinion on page 133:

A fully funded emergency fund covers three to six months of expense. What would it take for you to live three to six months if you lost your income?

I think it’s key here to point out that by “you,” the quote most likely refers to the full spending of a household – if it doesn’t, then you might be building an emergency fund that’s too small.

Three to six months? Think about how much you spend each month, then multiply that by, say, five. That’s quite a serious chunk of change. For us, it would probably be somewhere in the ballpark of $20,000, with almost half of that being our mortgage and homeowners’ insurance.

Is it enough? I think you have to look at it from the perspective that no amount will cover every possibility that could happen. Instead, you should be seeking an amount that’s large enough to cover every doomsday scenario you can reasonably think of. Consider the people around you and their most desperate moments.

How much would they have needed in those situations?

Easy to Access

Dave basically argues for a savings account on page 137:

Keep your emergency fund in something that is liquid. Liquid is a money term that means easy to get into with no penalties. If you would hesitate to use the fund because of the penalties you’ll incur to get it, you have it in the wrong place.

That basically means a savings account. It’s accessible at any time without penalty and it doesn’t fluctuate in value.

Obviously, you want it to be as safe as possible. This eliminates stocks – they’re inherently risky and fluctuate too much. The value of bonds can fluctuate, too, though not nearly as strongly. You don’t want to lose your balance once it’s invested.

At the same time, you want to be able to get at it without a penalty of any kind. Dave argues that this is a black mark against certificates of deposits. I disagree with that. With some careful planning, you can use certificates of deposit in a “ladder” system and never have to crack one. I like this idea because it helps you get a better rate of return and it’s a psychological barrier that keeps you from digging into it.

Dave points towards money market accounts, another little hint that this book was written prior to 2008.

Money market accounts might have great returns sometimes, but they’re not as safe as FDIC-insured savings account. Even better, if you hunt around, you can find FDIC-insured savings accounts that have a nicer return than pretty much any money market account and come with the insurance.

Three Months? Six Months? In the Middle?

The entire point of an emergency fund is to absorb risk, and some families are simply more at risk than others. On page 139:

For example, if you earn straight commission or are self-employed, you should use the six months rule. If you are single or you are a one-income married household, you should use the six-month rule because a job loss in your situation is a 100 percent cut in household income. If your job situation is unstable or there are chronic medical problems in the family, you, too, should lean toward the six month rule.

Personally, I feel as though children are a significant risk addition to one’s life. An adult can go out there and get a job. A three year old can’t do the same – they’re wholly dependent on the adult. Thus, if you have kids, I’d lean strongly towards a bigger fund.

I also think that six months isn’t necessarily the maximum. If all of your household income comes from freelancing, you have three kids, and there may be health issues in your future, six months probably isn’t enough. I’d have more than that – a year’s worth, perhaps?

Financial Peace Jr.: Teaching Kids About Money! : "Cool Tools" for Training Tomorrow's Millionaires!

Is Everybody on Board?

One issue I see readers writing to me about time and time again is the question of what to do when their partner isn’t on board with the financial changes they want to make. Dave hits on this a bit on page 142:

I don’t suggest you clean out your savings [down to $1,000 in order to pay off debt] if everyone isn’t having a Total Money Makeover.

I go further than that: if you’re in a relationship and your partner is not on board with making financial change, you’re wasting your time with it. Their actions will undermine everything you do and you’ll find yourself constantly at odds and angry with each other without making a drop of additional progress. That’s a dangerous recipe, right there.

If your partner is not on board with making some real financial changes, your focus shouldn’t be on charging full steam ahead without your partner. Instead, your focus should be on talking through your situation with your partner. You’ve got to understand where they’re coming from. Just pushing what you want won’t cut the mustard here – they’ll just see you as pushy and you’ll make negative progress, or you’ll get an act that makes it look like they’re on board when they’re really not.

Talk about your money. You’ve got to, or none of this will work.

Women and Men?

Are women more suited to have emergency funds than men? On page 144:

God wired ladies better on this subject than He did us. Their nature causes them to gravitate toward the emergency fund. Somewhere down inside the typical lady is a “security gland,” and when financial stress enters the scene, that gland will spasm.

The argument here is that by their very nature, women are more likely to see the value in an emergency fund than men. Men tend to be task-oriented, while women tend to be process- and security-oriented.
I think there’s actually something to this. I’m all in favor of gender equality, but different does not mean unequal. Different means that each side has traits that are beneficial. Guys are better at focusing in, at breaking down barriers. Women are better at planning and cooperation, at building fortresses of safety. Different attitudes are useful in different situations.

Why Do All This?

If the future is so unpredictable, why waste our lives right now putting so much effort into scrimping and saving and planning for that future? On page 146:

What used to be a huge, life-altering event will become a mere inconvenience. When you are debt-free and aggressively investing to become wealthy, taking a few months off from investing will put a new engine in a car. When I say the emergency fund is Murphy-repellent, that is only partially correct. The reality is that Murphy doesn’t visit as much, but when he does we hardly notice his presence.

A big emergency fund means that the bad events in that unpredictable future don’t wipe away all of the good things you have in your life.
Dave Ramsey's Financial Peace University: 91 Days to Beat Debt and Build Wealth!

Without an emergency fund, a job loss means panic. It means scrambling madly for work – any work. It means you might lose your home or your car. It’s scary.

With an emergency fund, you can roll with the punches. You can patiently dig for the right job. You can even give your dreams of freelancing a shot right now – after all, you’ve got time.

Without an emergency fund, a dead car means panic. It means you have to throw yourself further in debt, with even more monthly payments than before.

With an emergency fund, you just make the call and fix the problem. No big debts. No monthly payments. Just smooth sailing.

You’re left with unexpected events – but only the good kind.
Create a Six-Month Emergency Fund

Do you have any other thoughts on this chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Thursday, we’ll tackle the ninth chapter – Maximize Retirement Investing.

7 Ways to Use Social Media to Create Buzz-Worthy Events

2010-09-21T18:35:00.000-07:00

1. Engage

Get your potential attendees interacting with you early on by enabling some measure of feedback or crowd sourcing on the conference programming. South by Southwest has always led in this area, with its “panel picker” process that turns over 30% of the programming selection to potential attendees.

An easier way to do this would be to utilize something like Crowd Campaign, which gives participants a way to suggest content, and for others to vote on it. Or, you could go even simpler, and use Tweetpoll or PollDaddy

2. Intrigue

Almost all events have an official Web site. But very few (except for the geek events) take full advantage of all the free event listing and event management opportunities. At a minimum, you should create event pages on:
- Facebook Events
- Eventbrite (where you can also sell tickets, if you’re so inclined)
- Upcoming
- Linkedin (if it’s a business event)
Sure, its a bit of a hassle to oversee all of these event pages, but your attendees swim in different ponds. Plus, every conference has the same MVP attendee: some guy named Google. Why would you pass up a chance to double, triple, quadruple your search engine listings?

3. Invigorate

As the event draws closer, you have to pull potential attendees off of the fence with content hors d’ouerves
Start a Twitter contest. Online Marketing Summit does this well, awarding free registration to the conference for people that can correctly answer marketing trivia via their Twitter feed.

Get your speakers to produce teaser content. A simple video would be ideal. However, some speakers (either full of attitude or devoid of tech savvy) can’t handle the video creation process. In that case, set up a blog on Tumblr (for free, in about 10 minutes) and have your speakers call the toll-free number and leave a voicemail. It will be automatically transcribed, and posted to the official event blog.

Speaking of blogs, consider setting up a Netvibes.com page for the event, and creating a centralized repository for all blog posts by speakers. Netvibes.com is free, and all you need to do is pick a layout, and then subscribe to the RSS feeds of each speaker’s blog.

Use Pitchengine to create multi-media enabled press releases, and send the URL for the release to any and all “maybes” on your list.

Gather social information from all registrants. Create a Twitter list of all attendees, and update it each time a new person registers.

4. Integrate

Now we’re talking about the on-site experience, which is where social media can really add impact and get people talking.

Pick a hash tag for your event, so attendees and remote watchers can monitor on Twitter. Shorter the better, please. Then, start your conference with an unofficial Tweet-up. It gets your likely content creators motivated and excited.

Create an event within the event by running contests on Twitter during the conference.

5. Inform

I’m a big fan of voting via text message, and I’d like to see more events more toward session evaluations through that same interface. Do we really need to be killing trees for written speaker evaluation forms, not to mention the environmental impact of hundreds of golf pencils.

I also believe QR codes have huge potential at events, and SXSW put them on every name tag this year. Alas, until standards are adopted and the software is built in to smartphones, we won’t see widespread adoption. But, it will happen by 2012 for certain.

6. Propagate

Create your own media during the event.

Via Ustream you can stream live video of your event for free. Why wouldn’t you?

Set up an official Flickr gallery for the event, and encourage attendees to take photos and upload them. Give prizes for Photo of the Day.

7. Aggregate

Take the conference content and spread it as widely as possible. Your goal is to get the doubters that didn’t come this year to view that content and decide to go the next year.

Take every conference presentation, and instead of just putting them on your Web site or emailing links to attendees, release them on SlideShare (one per day for maximum impact)

Provide Twitter transcripts to attendees, and also post it to your various event pages. Backupify has a cool new, free service called Session Tweets where you can automatically make a PDF of all tweets using your event hashtag.

Reward good content. MarketingProfs’ Ann Handley staged a contest last year for their B2B Forum where attendees that created blog posts, video posts, photo galleries, etc and submitted them to the MarketingProfs blog were entered to win a prize – a free registration to next year’s event.

Why couldn’t you do that? Why can’t you do all of this?

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

The Total Money Makeover: The Debt Snowball

2010-09-21T13:08:00.000-07:00

This is the sixth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the seventh chapter, finishing on page 132. The next entry, covering the eighth chapter, will appear on Wednesday.

You’ve got a big pile of debts in front of you. They’re scary. The totals of all of the debts takes your breath away when you think about it. You don’t know where to start. You need a plan.

Dave Ramsey calls his plan the “debt snowball,” and it’s based on psychology, not math. If you’re going for pure math, the best way to pay off your debts would be to start with the one with the highest interest rate, since that will save you the most interest per dollar that you pay back.

Dave’s plan is different – he encourages people to pay back their debts from smallest balance to largest balance. The smallest balance debt gives you a “win” as early as possible in your debt repayment – which is a huge psychological boost.

Do I buy it? I played with the numbers a while back and my conclusion was that the difference between the plans – unless you’re talking about enormous debt loads with huge disparities in interest rate – doesn’t save you enough to not try the debt snowball method.

Identify the Enemy

On page 109, Dave makes a worthwhile point about figuring out what you’re working against:

The bottom line is that it is easy to become wealthy if you don’t have any payments. You may get sick of hearing it, but the key to winning any battle is to identify the enemy. The reason I am so passionate about getting rid of debt is that I have seen how many people make huge strides toward being a millionaire in the short time after they get rid of their payments.

I agree with this to a large extent, but I don’t think Ramsey really spells it out fully here or even later in the passage. If your goal is financial freedom, the enemy is unnecessary spending, not the debt. Debt is merely a symptom of that problem.

Let’s say you spend $100 more a month than you bring in without anything in the bank. This behavior means that you’re building up debt. Make a handful of spending changes and now you’re spending $100 less than you bring in. Put that extra $100 towards the debt and it goes away. Then you can start saving that $100 (and probably more, since you don’t have those debt payments to cover) towards a big goal.

It all comes back to getting your spending under control. If you can’t get your spending under control on a consistent basis, all of the debt planning in the world won’t do a thing.

Debt Repayment Is Hard

Ramsey argues that repaying your debts is hard on page 111:

This is the toughest of all the Baby Steps to your Total Money Makeover. It is so hard, but it is so worth it. This step requires the most effort, the most sacrifice, and is where all your broke friends and relatives will make fun of you (or join you).

Is it that hard? I think it’s hard in the sense that when you’re standing there at the starting line of a marathon, the finish line looks impossibly far away. Then you start running and you’re caught up in the race. You get into a rhythm, you’re gliding along, and before you know it, the finish line is there.

Lao-Tzu was absolutely right. “A journey of a thousand miles begins with a single step.”

That first step is the hardest part.

It definitely was the hardest part for me. I knew for a long time that “someday” I’d have to fix my debt problems, but that “someday” was always put off into the future.

Then, finally, I was forced into taking that first step. The fear of not taking a step grew greater than the fear of getting started.

But once I took that first step, the second one was easier, the third one was easier, and before you know it, I’m well along the path and it’s like a slow train coming around the bend, clickety clack.

Math Versus Behavior

The idea of psychology versus numbers comes to a head on page 111:

We have discussed that personal finance is 80 percent behavior and 20 percent head knowledge. The Debt Snowball is designed the way it is because we are more concerned with modifying behavior than correct mathematics. [...] Being a certified nerd, I always used to start with making the math work. I have learned that the math does need to work, but sometimes motivation is more important than math. This is one of these times.

As I mentioned earlier, I ran the math myself, comparing the “optimum” strategy (which means you repay your debts in order of interest rate, highest to lowest) to the “debt snowball” strategy (which means you repay your debts in order of balance, lowest to highest). What I found is that the math difference isn’t that big of a deal if you’re really hitting those debts with a strong force.

At the same time, it’s easy to see situations where the psychological difference is enormous. Let’s say that your smallest debt is your lowest interest debt and your highest interest debt is much bigger. If you throw the kitchen sink at the smaller debt, it goes poof pretty quickly – and that feels good. If you throw the kitchen sink at the bigger debt, it takes a long time for that debt to go poof. It’s a real slog – a painful one.

Some people get irritated if they think they’re doing things in a way that’s even slightly suboptimal and are also self-motivated enough to push through. Frankly, there aren’t too many of those people – those that are out there are probably not considering the “debt snowball.”

So, I think Dave’s plan works quite well.

How It Works In Detail

He lays out the plan in a single paragraph on page 114:

The Debt Snowball method requires you to list all your debts in order of smallest playoff balance to largest. List all your debts except your home; we will get to it in another step. List all of your debts – even loans from Mom and Dad or medical debts that have zero interest. I don’t care if there is interest or not. I don’t care if some have 24 percent interest and others 4 percent. List the debts smallest to largest!

This is a very good first step, but I don’t think it’s quite the final step.

Once you have that list, it’s worthwhile to call up each of your creditors and negotiate a bit. The big move is to ask for a lower rate on each of your credit cards. Some people get paranoid with this, asking things like “What if they cancel my card?” Well, what if they do? If you’re committed to reducing your debt, that shouldn’t be a real problem.

Another step you should take is stopping by your local credit union and seeing what they can do to help you consolidate some of those debts. You might be able to drastically reduce some of the interest rates via a personal loan or some other vehicle. Don’t get involved with a “debt reduction” company – use your local credit union.

Once you’ve tried those things, your list will be different – and easier. Cross off those debts that you consolidated – they’re done! At that point, rewrite your list, again with the debt with the lowest balance on top. Debt-Proof Living: The Complete Guide to Living Financially Free (Debt-Proof Living (Paperback))

Then comes the hard work – paying them off.

The Big Payoff

Dave explains why it’s a snowball on page 117:

After you list the debts smallest to largest, pay the minimum payment to stay current on all the debts except the smallest. Every dollar you can find from anywhere in your budget goes toward the smallest debt until it is paid. Once the smallest is paid, the payment from that debt, plus any extra “found” money, is added to the next smallest debt. (Trust me, once you get going, you will find money.) Then, when debt number two is paid off, you take the money that you used to pay on number one and number two and you pay it, plus any found money, on number three.

It’s like a snowball rolling down the hill. Your extra payments on that first debt are small, but it’s rolling along. Eventually, it’s paid off, and your extra payment picks up the minimum payment of the first debt. The snowball gets bigger as it rolls. Your next debt is done, and the snowball gets even bigger, picking up another minimum payment.

The part I found interesting here is this one: Trust me, once you get going, you will find money.
This is absolutely true, but it’s something people can scarcely believe when they first start. Once the debt starts slipping away, you start to really get into it. I know I certainly did. Watching the debt getting smaller and smaller is really exciting, and you want next month to be even more awesome. So you start looking for ways to save. You start looking for things to do differently.

And you find them.

After all, you wouldn’t be in debt trouble to begin with if you were spending your money in an optimal fashion.

There’s Not Enough Money To Get Started!

There usually is if you do things the right way. On page 124, after a story about a logjam on a river:

When the dynamite blew, logs and pieces of logs would fly into the air. After working so hard to cut the trees, some of them were a total loss. They had to blow up some of the timber to get the rest of the crop to market. That’s the sacrifice the situation required. Sometimes that is what you have to do with the stopped-up budget. You have to dynamite it. You have to get radical to get the money flowing again.

Radical usually gets people uncomfortable. I know this from experience – people don’t mind frugal tips as long as they’re easy, but I start getting flamed if I suggest something personally challenging. Cancel the cable? You’ll pry the remote from my cold, dead hands. Sell your car? Get a rope.

Here’s the thing, though. When you sit down and rationally consider getting rid of something you consider beyond question, quite often you find that it’s not really a bad move at all to get rid of it. Getting rid of cable is completely unthinkable to many people until they think about it. What are they getting from the cable that isn’t fulfilled by other avenues, like Hulu.com or over-the-air television or a $1 DVD rental once a week?
What about selling a car? I can’t stand the loss of freedom! What freedom? How often do you use the car in a way that isn’t served by the metro or a short walk or a bit more careful planning? Is it really worth the insurance cost to keep it around?

Look at something big. Ditch your house and move into an apartment. Rent out a room. Give up all beverages but water. Sell your television. The impact of a truly big move will be like a tidal wave over your debt – or any other big financial goals you have.

Do you have any other thoughts on this chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Wednesday, we’ll tackle the eighth chapter – Finish the Emergency Fund.

The Total Money Makeover: Save $1,000 Fast

2010-09-20T14:24:00.000-07:00

This is the fifth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the sixth chapter, finishing on page 108. The next entry, covering the seventh chapter, will appear on Tuesday.

One thing that Ramsey excels at is urgency. His entire persona, from his written words in the book to the things he says on the radio, practically demand urgency.

“You have to do this now.”

He’s right, though. If you’ve found yourself in a personal finance situation where everything falls apart if you lose your job tomorrow, fixing the problem is urgent. You’re being utterly held hostage by your job and by Lady Luck. Too many people find themselves in this situation and view it as normal.

If you lost your job tomorrow and had the engine fall out of your car the day after that, could you survive for three months without work and still hit all of your bills and get that car on the road? If the answer’s no, it is urgent. You’ve got to change something.

Baby Steps?

Dave lays out the importance of baby steps for pretty much any major life initiative, on page 93:

They way you eat an elephant is one bite at a time. Find something to do and do that with vigor until it is complete; then and only then do you move to the next step. If you try to do everything at once, you will fail. If you woke up this morning and realized you needed to lose 100 pounds, build your cardiovascular system, and tone your muscles, what would you do? If on the first day of your new plan you quit eating, run three miles, and lift all the weight you can lift with every muscle group, you will collapse. If you don’t collapse the first day, wait forty-eight hours for the muscle groups to lock up and the cardio to go crazy, and you will be bingeing on food shortly thereafter.

It’s absolutely true: you’re far better off taking steps that are too small than steps that are too big, because those giant steps are the ones that are likely to make you trip and fall.

This basic idea applies to anything you want to do in life. Want to be a writer? If you get up and start in on a schedule of pumping out 4,000 words a day, you’re going to burn out quickly. Instead, just practice the craft and write short things. My writing practice, to tell the truth, is often on Facebook – can I get across an interesting idea in 420 characters? Doing so improves me as a writer....

Want to be a golfer? If you start playing 72 holes a day, you’re going to get sick of it fast (and probably tear something). Instead, just focus on smaller tasks – go to the driving range for two buckets. Build your skills slowly and don’t burn out.

It’s true over and over again: baby steps work. I think the big reason people don’t do this is that they want results now and then they way overdo it, undoing any good they might have done. Dave Ramsey Starter Kit Includes The Total Money Makeover and Financial Peace Revisited, 2 DVDs and Starter Envelope Station)

The Power of Clear, Written Goals

Written goals are vital at every stage and in every aspect in life. From page 98:

Brian Tracy, motivational speaker, says, “What does it take to succeed on a big scale? A tremendous God-given talent? Inherited wealth? A decade of postgraduate education? Connections? Fortunately for most of us, what it takes is something very simple and accessible: clear, written goals.” According to Brian Tracy, a study of Harvard graduates found that after two years, the 3 percent who had written goals achieved more financially than the other 97 percent combined!

Writing down your goals makes them real – and makes them powerful.

I’m going to admit something here, something fairly goofy. I usually have somewhere between five and ten personal goals going at any one time. Each of them are very action-specific: “I am going to run a 5K by the end of the year.” “I’m going to write a truly great book.” … and so on.

Each day, I write down each of those goals, pen on paper. Seriously. Doing this every day hammers those goals into my mind and I see those goals in every action I do. Three of my goals are health-related right now and I can’t help but see them when I make a decision about what to eat or what to drink. I look in the fridge, the goals float through my mind, and I choose a spinach salad for lunch instead of a grease-filed choice.

It works. Without this, I wouldn’t have made Being Broke Sucks Today work. I wouldn’t have written a book in 2008, and I wouldn’t have been well into writing another book this year. I wouldn’t be able to read two challenging books a month. I wouldn’t be a good father – or at least not as involved as I am.

Get Current

There’s a big baby step before you dive in on the $1,000. On page 101:

Before we get to Baby Step One, you will have to do one other thing. You will have to be current with all your creditors. If you are behind on payments, the first goal will be to become current. If you are far behind, do necessities first, which are basic food, shelter, utilities, clothing, and transportation.

If you’re behind on your bills, you have to get caught up before doing anything else. Doing anything else puts the cart completely before the horse.

Many people think it’s “impossible” to get current once they reach a certain disastrous level. That’s usually not true, but you’ve got to be proactive. Call up the people you owe that you’re late with and start negotiating. They’re going to listen because it’s in their best interest to listen – if they don’t, they’re not going to get anything out of the money they owe you if you run away or declare bankruptcy.

No situation is impossible, particularly if you’re willing to step up to the plate and try to take things on head first.
The Total Money Makeover Journal

Baby Step One: Save $1,000 Cash As a Starter Emergency Fund

Why $1,000? Why not dive into paying off debts? Dave makes a good case for emergency funds on page 102:

It is going to rain. You need a rainy-day fund. You need an umbrella. Money magazine says that 78% of us will have a major negative event in a given ten-year period of time. The job is downsized, rightsized, reorganized, or you just plain get fired. There’s an unexpected pregnancy [...] Car blows up. Transmission goes out. You bury a loved one. Grown kids move home again. Life happens, so be ready. [...] Now, obviously, $1,000 isn’t going to catch all these big things, but it will catch the little ones until the emergency fund is fully funded.

One of the most frequent things I hear from readers is that they don’t see any reason to not use their credit card as an emergency fund. “I have tons of credit left, so that’s my emergency fund,” they’ll say.

Here’s the problem with that: credit is not cash. Your credit line is completely at the mercy of the credit card company. Sometimes they slash credit limits. Sometimes they outright cancel cards. These things often happen right at the moment when you’re in trouble and most “need” that limit.

On the other hand, cash is constant. A big company can’t take your savings away from you on a numerical whim. If everything goes bad, your credit cards can go poof – but if you’ve saved up an emergency fund, it’s there for you.

What Isn’t an Emergency?

Another “problem” is that people substitute irregular bills for emergencies. On page 104:

Most of America uses credit cards to catch all of life’s “emergencies.” Some of these so-called emergencies are events like Christmas. Christmas is not an emergency; it doesn’t sneak up on you. [...] Your car will need repairs, and your kids will outgrow their clothes. These are not emergencies; they are items that belong in your budget. If you don’t budget for them, they will feel like emergencies.

An expense that you know is coming isn’t an emergency. You know that your car will need maintenance, so an oil change or a minor repair isn’t an emergency. You know your father’s birthday is coming up, so a gift isn’t an emergency.

The real problem here is information management. I think many people wind up treating expected things as emergencies because they simply lose track of that information. They forget that their father’s birthday is coming up, so they don’t put aside cash for it. They forget that their car needs regular maintenance.

What’s the solution to that? Dave points to a budget, but I don’t think that’s really enough for many people. I suggest using a calendar – if an irregular bill is coming up, write it on the calendar. Even better, write a reminder a few weeks ahead of it on the calendar, too. This way, you can see that irregular expense coming and can plan for it instead of going “OH NO!” on the day of the event and just throwing plastic at it.

Get It Fast

On page 105:

Twist and wring out the budget, work extra hours, sell something, or have a garage sale, but quickly get your $1,000. Most of you should hit this step in less than a month. If it looks as though it’s going to take longer, do something radical. Deliver pizzas, work part time, or sell something else. Get crazy. You are way too close to the edge of falling over a major money cliff here.

You’ve got to get hardcore, in other words. I think this works well for a short-term burst – like getting that $1,000 – but it’s not sustainable because to do it you have to upset the apple cart on a lot of behaviors and routines in your life – and that runs completely contrary to the idea of taking little steps.

For me, selling things worked well for this step. I had a big, fat DVD collection full of movies that I rarely watched, so I sold most of them off. I had a ton of video games that I either didn’t enjoy or had already defeated, so I sold them all off. I had a lot of CDs that I knew I’d never listen to again – off they went!
Those moves not only gave me that emergency fund, but it also kicked out some of the debt that was floating around. Even better, it freed up a lot of room in our tiny apartment – eliminating a bunch of non-decorative stuff that just caught dust did wonders for things!

On Tuesday, we’ll tackle the seventh chapter – The Debt Snowball.

10 mistakes Independent Artists Make With Their Web Presence

2010-09-20T11:52:00.000-07:00

via MyMusicSuccess.com :

If you’re self designing your online presence there are some simple mistakes that artists, bands and labels make when they first start to build their website, MySpace, Facebook or other social media pages that turns away potential new fans and stops potential sales of their music. After visiting many artist websites, I found 4-5 of the following easy to rectify issues on at least 90% of pages we visited.

So what are the top 10 things that you can do to your online music web presence to make sure you avoid falling into the same trap?

#1 Where is the music?

Have you considered why anyone visits your site? It’s for your music right? OK so where is your music, is it buried on a sub page of your website or is it center stage with a widget on your home page? At the very least get a free ReverbNation widget and put it “above the fold” (at the top of your website where visitors can see it without scrolling down). Make sure that it is not set to auto play as visitors may also have other music playing when they land on your page, and there is nothing worse than a cacophony of different songs all playing at once on your PC. At the very least the visitor will switch their sound off, or close your site immediately.Developing Web Widget with HTML, CSS, JSON and AJAX: A Complete Guide to Web Widget

#2 Error 404 Not Found

Broken and mistyped links are the best way of telling visitors you are too busy to attend to your web presence and sending them elsewhere. They’ll probably think that you’ve given up music and will move on. Don’t rush the construction of your blog or website, MySpace, Facebook or other online pages. Make sure you take the time to test links carefully, and ask friends to do it too. One of the most common areas that links errors occur is in mail outs or newsletters. Ask a friend to check the links in your newsletter or mail shot BEFORE you send it out, as there is nothing worse than delivering your newsletter twice. At best it looks unprofessional, at worst you’ll get marked as spam by your fans…

#3 How can I contact you?

Do you want to hear from fans, the media, labels, licensing companies, and other opportunities that could further your career? Are you short on people contacting you about your music? Do you have a contact form on your website? No? Aha, so that’s why no-one is getting in touch. You may be a shy creative type that spends too much time locked away in the studio, but not putting a contact page on your website you are losing out on potential opportunities for your music every single day.

For some strange reason when people get in touch, they usually favor using a contact form over an email address, one of the best free form services is http://www.emailmeform.com/ so if you haven’t got a contact page on your website get over there now and set it up. Using a contact form on your website is also preferable to using an email link as it avoids spam robots hoovering up your mail address and adding it to mailing lists without your consent.

iTunes Gift Card

#4 Are you hiding your beauty, and why is your grandma in the picture?

Humans are funny things. We are a visual race, and the speed of light still outstrips the speed of sound. Our eyes pick up on things way before our ears do, so want to make an impression? Get some photos of you on your website! I can’t tell you how many artists hide behind their music. When a fan comes to your website they want to see YOU. Take the time to invest in some good photographs for your website and make sure that they are well shot, composed and retouched. If you can’t do this yourself either get a friend who’s interested in photography to do it or hire a local professional to do it for you.

Don’t put pictures up from the family album that include your grandma snoring away in the background after one too many sherries, it looks plain silly, and besides people don’t come to your website to see your grandma. The point I am making here though seriously is don’t overlook the photos on your website, make them part of your image. If your playing live, get someone to use a decent camera at the gig, don’t take pictures from a fans phone, they look terrible…

#5 Who needs a website anyway?

Most artists, bands or labels are quite content using their MySpace page as their main web presence which is a great way to start (especially as it very easy for visitors to hear your music using the integrated player – see #1). However laying out a MySpace page is both restrictive and tricky, and whilst you can achieve a lot using a professional designer or MySpace profile design tool, if you want to be taken seriously by the music industry register your own web domain and get a well designed website.

Also have you ever wondered why only people on MySpace contact you on MySpace? That’s because you have to sign in to contact someone on the social network, and not everyone has a MySpace login. So you are cutting out potential contacts if you don’t have an alternative to your MySpace. Don’t get blinkered, get a website. If you want to get an easy to use content management system for your band’s website, check out a fully hosted solution SubHub membership websites, where you can set up a great VIP website for your band at very low yearly costs (Oh and don’t forget the contact page!)

#6 Information Overload

Keep your website, MySpace, Facebook and other online social media sites to the point. I can’t tell you how many MySpace sites I have seen that post a LONG block of hard to read text all in one place, expecting people to be able to consume the information easily. Keep Bio’s brief and to the point, make sure it only includes relevant information. Make sure you filter only the best reviews, content, pictures, music and other assets for your website, don’t paste everything just to make it look like you have more background than you have. Less is more, and posting every tenuous piece of information on your web presence will make your page look cluttered, desperate and unprofessional. Keep it clean, and keep it high quality (Extra tip, if you are dyslexic or just can’t plain spell get someone from Elance to proof read your website – lots of typos make your website look totally unprofessional).

#7 Why do I care if you are in the local “Young Farmers” association?

Keep your music website on topic. Whilst background information in your Bio may be useful if you are targeting a certain type of fan and want them to feel an affinity with you, it is not helpful to post the latest updates on Swine Flu, or other non music related information on your website. Visitors will have probably found your website from another online source and are expecting it to deliver what they came there for – your music, so make sure the content of your bands website contains relevant information that serves the visitor’s expectations.

The Really, Really, Really Easy Step-by-Step Guide to Building Your Own Website: For Absolute Beginners of All Ages (Really, Really, Really Easy Step-By-Step Guide To...)

#8 I’ve got an ego and I’m gonna use it.

There is nothing that turns off fans and potential sales than a misplaced ego. Whilst it’s important to be confident, getting high and mighty about how great your music is, when you haven’t even mixed, mastered or fixed that dodgy vocal makes you look silly – period. Make sure that everything about your music really lives up to how you present it online, otherwise the world will take Dionne Warwick’s advice and just “Walk On By”.

#9 Your mail could not be delivered.

Are you short on responses from that newsletter you send out every month? Not had anyone contact you for months about your music? Does no one love me or my music? Check your email is actually working. The amount of bounce backs that we receive when contacting bands is amazing. If you set up a website and get an email address for your band, make sure it is active, and set it up in Outlook or Outlook Express. Check it regularly, and also send yourself regular test email to check your mail server is working, especially just before important mail outs or newsletters. This is especially important if you don’t normally use the band email every day. Quick extra tip here, don’t use a hotmail or free provider address for your band, it looks naff and shows a total lack of professionalism.

#10 If you’d like to come to the cash desk sir…

Have you ever tried to buy your own music from your website? About 90% of all online music sales are lost simply because there is no option to buy on your web presence when visitors like your music. “But it’s obvious it’s on iTunes” says the band, but it’s not. If I have to fire up iTunes search for your tracks, before I even get my credit card out then the likelihood of me purchasing your music is pretty slim. Make it uber easy for people to buy your music by putting clear links (with store logos for brand trust affirmation) directly to the purchase page on the online stores.

Make sure you link to a number of different stores, such as iTunes, Amazon, CDBaby, and other options if they are available to you. Try out sites such as Nimbit, Website Music Player, Reverbnation shop widgets, or other online storefronts too which could help drive sales. At the end of the day if you don’t have the ability to purchase from your website or other online touch points, you’re leaving money on the table.

The Total Money Makeover: Two More Hurdles

2010-09-17T10:53:00.000-07:00

This is the fourth of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the fifth chapter, finishing on page 92. The next entry, covering the sixth chapter, will appear on Monday.

The first five chapters of The Total Money Makeover don’t actually address Ramsey’s plan at all. Instead, it’s mostly an argument against culture, mostly the idea that the easy availability of debt in our modern life is a serious problem.

I agree with Ramsey in that regard, but I usually find that the root of it is deeper: a lack of personal finance education mixed with a prevalence of awful messages about ourselves delivered by the media. Think about it: did you learn anything about personal finance in school? Also, think about the ads you see – don’t they portray the people in those ads as being somehow better than you?

Together, that’s some awful medicine. Dave, in his own way, takes on both of those factors in this chapter.

Ignorance Isn’t a Four Letter Word

We live in a culture that rewards intelligence and knowledge, and often ignorance is seriously derided when it shouldn’t be. Dave spells it out pretty well on page 78:

In a culture that worships knowledge, to say ignorance about money is an issue makes some people defensive. Don’t be defensive. Ignorance is not a lack of intelligence; it is a lack of know-how.

The idea that ignorance is not a lack of knowledge is vital. Intelligence is the ability to take the knowledge that you have and put it together in interesting ways. Intelligence shines when you read two articles on only vaguely related subjects and are able to put together a completely new idea from those two articles. Intelligence does not mean that you’ve got tons of knowledge in your head. In fact, I’d often make the opposite observation – many of the most intelligent people I know continually respect how little they know and how much they do not know.Emotional Intelligence 2.0

Shopper Intimacy: A Practical Guide to Leveraging Marketing Intelligence to Drive Retail Success

I’ll use myself for an example. I don’t know much about world history. I don’t know much about physics. I don’t know much about high-level athletic training. I don’t know much about fixing cars. I don’t know much about plumbing. I don’t know much about complex mathematics. There are countless other areas that I’m willing to admit ignorance in.

Ignorance can be overcome, though. If I so chose, I could spend some time educating myself on plumbing with a good do-it-yourself book or two and some time around the pipes. I could learn more about physics by reading up on the subject and perhaps taking some coursework on it. I could learn more about working on cars by simply trying it. Hard work overcomes ignorance every time.

It’s not shameful to admit you do not know everything – no one does. In fact, I’d argue the opposite – pretending you know everything when you do not is dangerous and harmful to yourself and to others. This same exact logic applies to personal finance – it’s fine to admit that you’re ignorant about money. What’s dangerous is when you choose not to admit it – or you delude yourself into thinking that you truly aren’t ignorant about it.

Overcoming Ignorance About Money (or Anything Else)

Dave’s recipe for overcoming ignorance matches up well with my own feelings on the topic. On page 79:

Overcoming ignorance is easy. First, with no shame, admit that you are not a financial expert because you were never taught. Second, finish this book. Third, go on a lifetime quest to learn more about money. You don’t need to apply to Harvard to get an MBA with a specialization in finance; you don’t have to watch the financial channel instead of a great movie. You do need to read something about money at least once a year. Your actions should show that you care about money by learning something about it.

This really is a strong formula for overcoming general ignorance on a subject. It will not make you a world-beating expert, but it will give you the background you need to actually make that topic work in your everyday life.

Let’s translate it a bit. Pick a topic you’d like to not be ignorant on, then do as follows.
First, with no shame, admit that you are not an expert on that topic because you were never taught or were taught poorly. Second, read a general book on the topic. Third, go on a quest to learn more about the topic. You don’t need to apply to Harvard to get an advanced degree in the topic; you don’t have to watch documentaries or read piles of dry books instead of watching a great movie or reading a fun book. You do need to read something about the topic at least once a year. Your actions should show that you care about the topic by learning something about it.

Sounds like a recipe for getting up to speed to me!

What’s Expected of Us

On pages 81-82:

Peer pressure, cultural expectations, “reasonable standard of living” – I don’t care how you say it, we all need to be accepted by our crowd and our families. The need for approval and respect drives us to do some really insane things. One of the paradoxically dumb things we do is to destroy our finances by buying garbage we can’t afford to try to make ourselves appear wealthy to others.

I fell into this trap big time before my financial turnaround. I constantly tried to buy things to impress others. I’d pay for a huge group to go out to eat. I’d buy gadgets I didn’t even really want simply because it was impressive to have an amazing item. I had to always have the “latest” of everything.

Now? I realized that people didn’t like me because I had the latest things or because I bought dinner. They liked me because I was me. Sure, there were a few hangers-on who didn’t want to hang out with me any more because I wasn’t engaged in whatever activity they were obsessed with, but what was that friendship, really, if that happens?

BestCredit: How to Win the Credit Game, 2nd Edition

In fact, it became easier to relate to people once I realized this. I was no longer worried about saying the right thing, having the right thing, or keeping up appearances. People wanted to be around because I was me – and that’s all I needed.

Who cares what the Joneses have? I can either be me, or I can be me with a car I don’t really want and a debt burden making me sad.

What’s Your Jaguar?

I really liked the tale Dave told about owning a Jaguar, starting on page 86:

I had the eye of my heart set on a Jaguar. I “needed” a Jaguar. What I needed was for people to be impressed with my success. What I needed was family raising an eyebrow of approval based on my ability to win. What I yearned for was respect. What I was so shallow to believe was that the car I drove gave me these things.

My Jaguar was food. I felt a constant desire to take people out to eat at my favorite restaurants – often very expensive ones. I’d take my parents out. I’d take my friends out. I’d seek out really expensive amazing places and tell the waiter to just give the whole bill straight to me. I’d tip really big right in front of everyone.

Doing this made me feel like I was important and that I was earning respect. What I found was that mostly I was just making the other people feel sort of awkward. They weren’t there to be shocked by my largesse – they were there because they wanted to go out for a nice evening with someone whose company they enjoyed.

Guess what? I stopped paying for meals for others. Guess what else? Whenever I ask any of my family or friends to actually go out to eat – something I don’t do too often any more – they’re still quite happy to accept and quite happy to fit the bill. In fact, they may be happier – they don’t have that vague sense of discomfort they used to get when I’d grab the bill and throw down the plastic.

The American Nightmare

If you’re jealous of what others have, put yourself in their shoes for a moment. Do you think they are actually able to afford what they have? On page 83:

They present the perfect picture of the American dream that has turned into a nightmare. Behind the perfect hair and the French manicure, there was deep desperation, a sense of futility, an unraveling marriage, and disgust with themselves.

The people that you’re jealous of often have had to make huge sacrifices to get the things you want. The fancy car? It’s often paid for with a huge pile of debt. The amazing career? That person spent a lot of sleepless nights cutting their teeth to get there – and likely has sacrificed a strong relationship with the people around them to get it. That perfect marriage? It’s likely either the result of a lot of maintenance or it’s a facade.

There is no such thing as a free lunch in life. The people that have those things that you’re jealous of have often paid dearly for those things. When you peek behind the mirror a bit, you’ll see the cost they paid – and are likely still paying – to get there. And, quite often, when you look at things as a whole, you find a balance of affairs that you don’t want yourself.

That’s why I gave up so much spending. I once thought I couldn’t imagine life without lots of trips to bookstores and game stores and coffee shops. At the same time, though, I was up at night sick with worry about my debts and leashed to a paperwork-filled career. I had those little oases of seeming happiness, but they were surrounded by lots of unhappiness. If you saw me out and about at the bookstore or at the coffee shop, you might have been jealous – look at that guy with the armload of books and the smile on his face?
But if you saw the worried guy, sitting there writing computer code at eleven at night, then not sleeping at two in the morning because he was worried about the bills… then you might get a different picture of things.

A Useful Lesson from Twelve-Step Programs

On page 91, Ramsey points out a worthwhile lesson from twelve step programs:

The Twelve Steppers have it right. They say, “Continuing to do the same thing over and over again and expecting a different result is the definition of insanity.”

If you’re trying to succeed in life – or in some specific aspect of life – and you keep failing at it or never getting anywhere, you probably need to change your approach.

Obviously, Dave is referring to money issues here. If you keep doing the same things you’re doing and you’re not getting ahead financially, you need to make some changes.

But it’s true for everything. Let’s say you’re a writer and you’ve finished a book. You’re trying to get it published but you’ve received twenty rejection letters. You need to change something. Why not give away the book in bite-sized increments? Why not chunk it down into 1,000 word segments and blog the entire book? Why not put that book aside for a while, write something new, and look at it later? The key here is that what you’re doing isn’t working, so you need to try something else. Getting a steady stream of rejection is never the road to success.

On Monday, we’ll tackle the sixth chapter – Save $1,000 Fast.

The Total Money Makeover: Money Myths – The (Non)Secrets of the Rich

2010-09-16T11:35:00.000-07:00

This is the third of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the fourth chapter, finishing on page 76. The next entry, covering the fourth chapter, will appear on Friday.

You can get rich in just three weeks with my $99 tape course!
We can eliminate 70% of your debt immediately!
Gold is the only thing that will save you when the economy fails!
Do you smell the snake oil yet?

There are countless sharks in the water that want your money. One powerful technique for selling you something you don’t need is to prey on your fears. Perhaps you fear the government’s long term future (been listening to too much talk radio, haven’t you?). Perhaps you fear immediate personal financial failure. Perhaps you fear your professional failure – and what others might think of you if you’re not successful.
People will prey on those fears. They try to do it all the time. Commercials telling you that you can eliminate your debt. Pitchmen talking about how great an investment gold is. Smooth talkers telling you about their “program” for quick income at home.

Almost all of these plans do two things. They grab onto your fears and they combine it with some sort of widely-spread myth. The myth of the person who got rich quickly. The myth that debt can be whisked away through this or that loophole in the law.

Myths are dangerous things. They’re usually based on information that might have been true a hundred years ago – or are based on extremely rare cases that, again, don’t reflect how you live your life. Yet they persist because they sound good.

Denying Risk Because of Laziness

Early in the chapter, Ramsey goes on a rant about the dangers of denying risk in your life. One point he makes on page 52:

Sometimes risk denial is a kind of laziness, when we don’t want to take the energy to realize that energy is needed to win.

I think this very factor holds people back from a lot of career advancement. They look at the huge amount of energy they would need to expend to get ahead – networking, building a business, and so on – and decide that they’d rather expend their energy doing something else.

Another example: we look at the effort that it would take to keep track of our spending for a few months and get a real grip on our finances – and we decide that the status quo is just fine.

Or we think about the effort that it would take to actually build a price book and figure out which grocery store really is the cheapest for what we buy – so we shrug it off and just go shopping at the Wal-Mart Supercenter.

Laziness is the enemy of success in every area.

Denying Risk Because of the Beat Down

Dave’s rant against risk denial continues:

Other times, risk denial is a kind of surrender in which we settle for a bad solution because we are so beat down or beat up that we wave the white flag and do something stupid.

I’m reminded of those ludicrous debt elimination programs advertised on late night television. “We can eliminate 90% of your debt with our program!”

Well, this means one of two things. You’re either going to file for some sort of bankruptcy protection (which has a whole different can of worms) and pay them for the “help” or you’re going to sign up for their debt repayment plan, where you pay them money for something you could cook up yourself.

Either way, you lose. Why not just make your own debt repayment plan? It’s easy and a lot cheaper than paying outrageous monthly fees for companies to do this for you.

Denying Risk for False Security

Yes, I liked the denying risk theme. Dave goes on to say:

At still other times, risk denial can have an active component in which we search for a false security that simply doesn’t exist.

Gold investing immediately comes to mind. Numerous local talk radio stations carry tons of ads for buying gold as an investment, coupled with shows like Glenn Beck which talk breathlessly about the fall of the American government (I wish I were kidding).

Gold sellers prey on that fear, bringing up the old tales about how gold is the safest thing to own when governments are falling. In practice, though, that’s rarely true – gold is scarce enough that most people resort to a barter system until things straighten out, and land, skills, and resources have the real value.

Gold is that false security. It makes people believe that they’ll be safe if the government collapses. In a fearful environment, people seek out that safety.

That’s not to say gold doesn’t have a role in a diversified investment portfolio, but people with enough of a bankroll to need diversification into precious metals probably aren’t reading Being Broke Sucks or listening to talk radio all day.

Cash Value Life Insurance Is Junk

This is one of those points that I absolutely love in this book. Dave lays out the case against whole life and universal life insurance on page 58:

All of the [extra payments beyond the price of term insurance] per month disappears in commissions and expenses for the first three years; after that, the return will average 2.6 percent per year for Whole Life, 4.2 percent for Universal Life, and 7.4 percent for the new-and-improved Variable Life policy that includes mutual funds. These statistics are from Consumer Reports, Consumer Federation of America, Kiplinger’s Personal Finance, and FortuneNational Underwriter, The Industry Mouthpiece, showed charts of returns from fourteen national companies. The returns they show average only 6.29 percent over twenty years. [...] Worse yet, with Whole Life and Universal Life, the savings you finally build up after being ripped off for years don’t go to your family upon your death; the only benefit paid to your family is the face value of a policy [...]. The truth is that you would be better off to get the [inexpensive] term policy and put the [extra payments beyond the price of term insurance] in a cookie jar! magazine, so these are the real numbers.

That pretty much sums it up. If you want insurance, buy bread-and-butter term life insurance. If you want an investment, buy an investment from a brokerage with low-cost investments (like Vanguard, for one). Mix the two and you’ll find yourself eaten alive by fees and commissions.

Look, I don’t blame a well-meaning grandparent for buying whole life insurance for their grandchildren. Their heart is in the right place – they want to protect their own children when their grandchildren are young and give the grandchildren a valuable investment when they’re older.

However, I’d encourage them to split that $100 a month into two batches instead of putting it all into the insurance. Use a small part of that money for a small term policy on the child so your own children won’t have a financial burden if the unthinkable happens. The other $93 a month? Put it in an investment account.

Important/Not Urgent

One of the handful of useful ideas in Stephen Covey’s book The 7 Habits of Highly Effective People is the idea that our tasks all fall into four groups – Urgent & Important, Urgent & Not Important, Important & Not Urgent, and Not Important & Not Urgent.

Covey argues that the distinction we should make is whether something is important or not (tasks in the Important & Urgent and the Important & Not Urgent groups), but in practice we usually focus on the urgency instead (Urgent & Important and Urgent & Not Important).

This has a huge impact on personal finance. Dave spells it out on page 62:

We take care of the Urgent/Important stuff, but what is Important/Not Urgent [...] is planning. You can pay the electric bill or sit in the dark, but if you don’t do a monthly spending plan, there is no apparent immediate damage.

I think this is one of the biggest reasons people put off financial planning. They are aware that it’s important, but they’re also aware that it’s not urgent.

Since so many of our lives are seemingly in constant “crisis mode” where we move from one fire to the next, we find ourselves falling easily into a situation where we just deal with what’s urgent and don’t even consider what’s important.

The end result? We find ourselves often missing out on many very important things in life because they’re not urgent. We skip playing with our kids because a client is calling us about a minor detail. We gloss over financial planning because there are fifty eight household chores that need to be done.

That lost time costs us. Every month we don’t save directly hurts our retirement. Every week we don’t contribute to our 401(k) hurts us. It comes around.

A Weird Argument for Cash

I think Dave goes off the rails on page 71 when talking about the risk of carrying cash versus carrying credit cards:

The crooks assume that your purse is like all the others filled with credit cards that are over the limit. Look, I’m not making light of crime. There’s a chance you may get robbed, because people do get robbed -whether they carry extra cash or not. And if it happens to you, the cash will be taken. But, trust me, you need to be far more worried about the danger of using credit cards than the danger of being robbed while carrying cash. Carrying cash doesn’t make you more likely to get robbed; on the contrary, the mismanagement of plastic is robbing you every month.

First of all, why not use a debit card instead of cash? A debit card allows you to only access the cash you actually have – the stuff sitting in your checking account. It also has virtually the same consumer protections as a credit card – if someone steals your debit card, just call up your bank and things are secure.

Second, having $200 in your purse (or wallet) makes it just as easy to blow $200 on something unnecessary as it is having a credit card in your purse (or wallet).

A credit card is just an excuse to exercise a lack of self control.

Having a large amount of cash on you is a security risk, no two ways about it. Dave is making the mistake of confusing one kind of risk (the risk of a lack of self control, which can take hold whether you have cash or a credit card in your pocket) with another kind (the risk of having your money stolen, which is much easier to fall prey to with cash on hand than with a credit card on hand).

Do you have any other thoughts on the fourth chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Friday, we’ll tackle the fifth chapter – Two More Hurdles.

10 Strategies for Success in the Music Business

2010-09-15T14:23:00.000-07:00

via Dave Kusek the Founder and CEO of Music Power Network and Vice President at Berklee College of Music. He is also the co-author of the best selling music business book, The Future of Music: Manifesto for the Digital Music Revolution.

Here are 10 recommendations for strategies that can lead to success in music, and in life. Take them with a grain of salt. With this new decade comes the promise of digital music, the power of the entrepreneur and the tools to connect with an audience and deliver the goods. Here are 10 Strategies for Success in Music from Music Power Network.

1. Living a life in music is a privilege. Earn it.

There is very little more satisfying then spending time making music. If you make this your life's work, then you can be truly joyful. However, the chances of being successful are extremely low and the only people who are going to get there are going to have to work hard and earn the right to be a musician. Respect the privilege of being free enough to have this choice (if you do) and honor the opportunity.

2. No one is in charge of your muse but you. Be happy and positive.

People can be their own worst enemy. Countless times I have heard artists tell me the reasons why their career is not working out. Most of the time they are putting blocks in their way and pointing fingers at people and things that are holding them back. Stop whining and blaming other people and make the conscious decision that you are going to be successful and that things are going to work out in your favor. You are creating your own reality every day, so make it a good one and excel.

3. Practice, practice, practice - then go for it. Over prepare.

You can never be ready enough for opportunity. Your live shows can always be better, your songs can be more amazing, and your playing can only improve. As the CEO of your own musician business, you can learn how to run the company more effectively, reach out to more fans and be an more effective social media marketer. Don't hold yourself back by not being ready. Be a professional.

4. If you suck, you will never make it. Find a way to be great.

Lets face it, it is really hard to be amazing. Some people have the natural talent and you can see it in the first 5 seconds of meeting them. They are truly blessed. The rest of us have to find our niche, our passion, our calling and then reach for it. Ask people around you for feedback. Find what you are good at and focus on that. Get other people to help you. If you don't stand out and rise above the pack, you will struggle forever. Be amazing.

5. Learn how to breathe and keep your focus. Stay calm.

There is nothing more pleasant than working with someone who knows who they are and what their goal is. Remember the old adages of thinking before you speak, and taking a deep breath before you lay into someone. Most of us have a lot going on in our lives and we can all benefit from staying focused on our goals and remaining calm in most situations. Learn yoga, exercise, run, meditate, sit still, breathe, learn who you are.

6. Don't take yourself too seriously, no one else does. Have fun.

I am amazed at how many people spend so much time looking backwards and trying to understand what people think of them. This is worrying about the past and not embracing the future. Reviews are important, but don't run to them or let them ruin your day. Not everyone is going to like you, but more people will if you are having a good time.

7. No matter how difficult things get, move forward. Don’t give up.

The only thing that will help your career take off is forward momentum. That is how you are going to reach your goals. A lot of people are stuck in their own mud. Take action, make a move and then see what happens. Don't spend time procrastinating or worrying about how hard it is, just do something positive to advance your cause. You will feel much better by acting instead of waiting or worrying.

8. Find a way to make money. Start small and grow. Avoid being in debt.

This is probably the most important strategy of them all and why so many artists have gotten into trouble in the past by taking label advances. All that is, is a big loan. Get some kind of cash flow happening right away, no matter how small. Sell merch, play for the door, license your songs, play sessions, teach, write, start your musician business. The biggest mistake you can make is to borrow a lot of money and then spend it on things that don't matter.

9. Be unique and true to your vision. Say something.

The people that we remember are the ones that are unique, exciting, special, provocative, fascinating, original, inventive, interesting. Music is a basic form of communication. The really successful artists have something to say and work on delivering their message. Your chances of success go up exponentially if you have a unique position and message and create a following of fans who really listen to you because you have something important to say.

10. Work and play with people you like every day. Collaborate Often.

Music is a tribal experience. You cannot make great music alone. Surround yourself with talented people, write together, play together, try new things. Bounce inspiration off of each other and learn. Listen to each other and let the music weave it's way around you. Find a producer, songwriting partner, other musicians and dive in together. The whole is greater than the sum of its parts.
Wonderful things are waiting to happen to you.

10 mistakes Independent Artists Make With Their Web Presence

2010-09-15T12:52:00.000-07:00

So what are the top 10 things that you can do to your online music web presence to make sure you avoid falling into the same trap?

#1 Where is the music?

#2 Error 404 Not Found

#3 How can I contact you?

#4 Are you hiding your beauty, and whats up with the bathroom camera shot?

Don’t put pictures up from the family album that include your bathroom shot with toilet paper in the background or your moms curling iron, it looks plain silly, and besides people don’t come to your website to see your bathroom. The point I am making here though seriously is don’t overlook the photos on your website, make them part of your image. If your playing live, get someone to use a decent camera at the gig, don’t take pictures from a fans phone, they look terrible…

#5 Who needs a website anyway?

#6 Information Overload

#7 Why do I care if you are in the local “Young Farmers” association?

#8 I’ve got an ego and I’m gonna use it.

#9 Your mail could not be delivered.

#10 If you’d like to come to the cash desk sir…

The Total Money Makeover: Debt Myths

2010-09-15T11:26:00.000-07:00

This is the second of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This entry covers the third chapter, finishing on page 51. The next entry, covering the fourth chapter, will appear on Thursday.

Dave Ramsey is probably the loudest proponent out there of the “debt is bad” mantra and he makes the case for it loud and clear in this chapter. In his eyes, outside of a home mortgage (and that one should be paid off ASAP), all debt is bad.

I agree completely. The only problem comes in when this mantra is taken too far and overlooks the benefits of establishing a positive credit history. The positives of being debt free heavily outweigh the negatives of being heavily in debt, but being debt free doesn’t mean you should sacrifice a good credit history along the way. Let’s talk about this whole picture.

Not Using Debt Is Ridiculous?

The usage of debt for major purchases is definitely ingrained in the American psyche. At virtually every retailer you visit, there’s an offer to sign up for a credit card or finance the purchase you’re about to make. It seems so natural that many people assume it is natural. On page 19, Ramsey mentions this phenomenon:

[I]n the last several years, I have found that a major barrier to winning is our view of debt. Most people who have made the decision to stop borrowing money have experienced something weird: ridicule. Friends and family who are disciples of the myth that debt is good have ridiculed those on the path to freedom.

Given that financing usually means paying substantially more for the item over the long run, anyone who chides you for paying cash is actually chiding you for paying less – ludicrous, in other words.
My big issue here is how to deal with people who make comments like this. Whenever I’ve faced situations like this, I’ve found that explaining the truth doesn’t work – I’m usually met with a vacant, wide-eyed look that clearly indicates that the other person has no idea what I’m talking about.
Instead, my approach is to simply smile, nod, and do my own thing. Over the long run, my bank account will prove me right in paying cash as often as possible.

Risky Debt

On page 21, Ramsey argues that simply possessing debt is a risk, let alone paying it late:

My contention is that debt brings on enough risk to offset any advantage that could be gained through leverage of debt. Given time, a lifetime, risk will destroy the perceived returns purported by the mythsayers.

This is one of the most powerful arguments against debt, in my opinion. Most of the time, when people make the case for taking on debt, they make assumptions that involve a perfect, trouble-free life.

Sure, it’s easy to make a $400 a month payment given your current life situation, but what happens if you lose your job tomorrow? Or in a year? What if you suffer a major illness? What if your marriage falls apart? What if you get married? What if an unexpected child arrives?

Forecasting payments into the future can be smooth but the realities of our lives are quite bumpy, indeed. Lives don’t follow the smooth lines and curves of a debt repayment schedule, and saddling our lives with such lines and curves might enable us to get a car a bit earlier, but it also adds a lot of stress and worry if our life zigs when we expect it to zag.

Respect your complex, beautiful life and avoid unnecessary debt.

Relatives Shouldn’t Be Lenders

One of my biggest personal standards for money is to not lend money to family. If I decide to give someone a helping hand, it’ll be in the form of a gift, not a loan. Ramsey makes the case on page 26:

Hundreds of times I’ve seen relationships strained and sometimes destroyed. We all have, but we continue to believe the myth that a loan to a loved one is a blessing. It isn’t; it is a curse. Don’t put that burden on any relationship you care about.

Do you love your mortgage lender? How about your credit card company – do you look forward to getting together with them at Christmastime? Ever felt like inviting your car salesman to your New Years’ party?

The reason is that the lending/borrowing relationship doesn’t mix well with great interpersonal relations. If you borrow money from someone, you suddenly have a financial obligation to that person. You have to pay them back or incur some sort of retribution.

Retribution? That’s not exactly a concept that mixes well with close relationships and family events. Nor should it. No one wants to spend time with a person that’s demanding money from them. Thus, after a loan between friends or loved ones, it’s natural to expect that relationship to decay in some way.

No relationship is worth that decay. If you’ve decided that you really must help someone out, make that help into a gift, not a loan.

Look Good or Be Good?

On page 33, Dave digs into the difference between putting up appearances and actually having something to back it up:

Having been a millionaire and gone broke, I dug my way out by making a decision about looking good versus being good. Looking good is when your broke friends are impressed by what you drive, and being good is having more money than they have.

Something has always troubled me about the phrase “fake it ’till you make it.” I can understand it in some situations, where you have to put up a very polished front in order to further your career.

The problem comes when “fake it ’till you make it” becomes a life philosophy. If you find yourself leasing a BMW so that you can “fake it” and put up an appearance of being financially affluent when you’re really not, you’re entering into a trap.

Sure, you might be able to put up an appearance of “making it” with that purchase, but your income will be devoured by that car instead of being able to take advantage of other opportunities. In three years, you’ll have nothing in the bank and a car that just went off lease.

Instead, if you “fake it” a little less, buy a low end car and make it look as nice as you can, you can build up that bankroll, build some security, and eventually purchase that car.

You might be able to “fake it” now, but if you want to “make it” sooner, you’ll tone down on the fakery and keep yourself out of debt.

On Buying a New Car

On page 37, Dave makes a case against buying a new car:

A good used car is as reliable or more reliable than a new car. A new $28,000 car will lose about $17,000 of value in the first four years you own it. That is almost $100 per week in lost value.

I understand where Ramsey is coming from, but it doesn’t take into account several factors.
First, the only cars that depreciate like that were junk to begin with. If you have a car that depreciates 70% in the first four years, that car has a very poor record for long-term reliability. Reliable cars simply do not depreciate that fast.

Second, the first four years are the most worry-free for a car. During that period, they’re under warranty, meaning if something goes wrong, it doesn’t come out of your pocket. Once that warranty ends, you’re on your own. It’s during that warranty period that you can figure out whether the car is actually reliable or it’s not without a cavalcade of big bills.

Third, in a down economy, there are huge incentives to buy new. Sales, rebates, and other offers pop up all over the place, some of them impressive. There are often tax breaks for new car purchases as well, passed by Congress in a short-term effort to boost spending.

I am not saying that buying new is better than buying used. Instead, I am merely saying that it is a mistake to automatically exclude a new purchase, particularly if you can afford it.

Ramsey overstates his case here, though I understand why he does it. A forceful case on behalf of a good principle is a great tactic for convincing people of the principle. I do agree that buying used is often the best deal when buying a car, but to ignore new cars does the buyer a disservice.

Mortgages and Credit Cards

On page 39, Ramsey talks about why you don’t need to build credit to get a mortgage:

You will need to find a mortgage company that does actual underwriting. That means they are professional enough to process the details of your life instead of using only a Beacon score (lending for dummies). You can get a mortgage if you lived right.

Ramsey’s absolutely right here – you don’t need credit to get a mortgage, as long as you have a good housing history and a good record of paying your bills on time. A manual underwriter will dig these things out. An aside: if you’re in this situation, visit your local credit union first. They’re more likely to do manual underwriting.

The problem here is that a mortgage is not the only avenue through which good credit can help you. One’s credit score is used in lots of ways: determining insurance rates, aiding in many job application processes, and so on.
The Skinny on Credit Cards: How to Master the Credit Card Game
That’s why I think limited use of a credit card is actually a good thing. Leave the card at home most of the time. Only use it for specific purchases that you would otherwise make, like gas or groceries. Then, at the end of the month, pay off the balance in full, which should be trivial since you’re not buying more because of the card.

This accomplishes the big goal of improving your credit score without incurring debt. Having a good credit score improves your hiring chances and makes you eligible for better insurance rates, putting money directly in your pocket. Later, if you do get a home loan, you can simply trash that card if you so with.

If you’re already doing that, you might as well choose a card that helps you in other ways. For example, if you’re buying a card just to buy gas on to help your credit, get the Visa or MasterCard available from your gas station chain of choice (like BP). That way, you’ll get rebates on the gas you buy along the way – another way to save.

The trick is to simply leave the card at home. Don’t use it for any other purchases besides the ones you plan in advance, like gas purchases, and keep it somewhere safe outside of those opportunities.

Do you have any other thoughts on the third chapter of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

On Thursday, we’ll tackle the fourth chapter – Money Myths: The (Non)Secrets of the Rich.

The Total Money Makeover: The Challenge … and Denial

2010-09-14T19:38:00.000-07:00

This is the first of twelve parts of a “book club” reading and discussion of Dave Ramsey’s The Total Money Makeover, where this book on debt reduction is teased apart and looked at in detail. This first entry covers the preface and the first two chapters, finishing on page 16. The next entry, covering the third chapter, will appear in the near future.

Let’s get this straight right off the bat. I like what Dave Ramsey has to say when it comes to personal finance. I find much of his material makes a lot of sense and he does a great job of balancing a “coaching” attitude without going too over the top a la Larry Winget.

That being said, I don’t care much at all about his political commentary. I know that his relationship with Fox News pretty much requires a conservative bent, but his political perspectives feel very much out in right field to me with only a tenuous connection at best to his personal finance talk.

Given that, I’m going to completely ignore his politics for this discussion. If it’s not inside The Total Money Makeover, which is an excellent book on debt reduction and focus, I’m not going to talk about it.
Ahem.

So what exactly is The Total Money Makeover all about? It’s just a very straightforward plan for getting in control of your finances, particularly in terms of overcoming a heavy load of debt. Many people have “turned the corner” – meaning they’ve realized that debt is dangerous and are actually committed to spending less – but the mountain of debt they’ve incurred makes it almost impossible to move forward. That’s exactly who the book is written for.

‘80% Behavior, 20% Head Knowledge’

Right off the bat, on the first page of the introduction, the basic idea is made clear:

I am positive that personal finance is 80 percent behavior and 20 percent head knowledge. Our concentration on behavior – realizing that most folks have a good idea of what to do with money but not how to do it – has led us to a different view of personal finance. Most financial people make the mistake of trying to show you the number, thinking that you just don’t get the math. I am sure that the problem with my money is the guy in the mirror.

I wholeheartedly agree with this. All of us know that it’s important to save and can see the numbers on how useful it really is. The trick is actually doing it – and that’s all psychology.

If you don’t truly make up your mind to achieve financial success, you’ll hold back. You won’t save – or you won’t save much. You’ll keep telling yourself that “later” is the right time to do it.

And then you’ll find yourself in ten years having not made any progress on your big goals in life.
The choice to start spending less than you earn is a hard one, but it’s the most important one. That choice has nothing to do with math, with running the numbers, or anything else. It’s inside your head.

If You Will Live Like No One Else, Later You Can Live Like No One Else

That phrase is found at the bottom of virtually every page in the book – it’s basically the book’s mantra. Dave’s take on it is clear: live hard now and you’ll live easy later. My take is a little bit different.

I agree with him largely on the first part: it’s incredibly important to tighten up that spending and get rid of the debt. Doing that requires learning how to spend less – and also not allowing yourself to use that extra money for anything but getting rid of debt and building a future. That requires living “different” in a way – your goals shift from the shiny new car and the shiny vacation to the removal of all of your debt.

On my block, I can certainly say I see a lot of shiny cars – my truck is the oldest vehicle on the block, by far. In the end, though, my truck works – and that’s all I can really ask of it. It gets the kids to daycare and gets me to the library, which is really all I need. As long as it keeps running, we’ll keep it. And that’s living quite different when we’re surrounded by vehicles more than ten years newer than my truck.

It’s the other part that’s tricky. I don’t view the “later you can live like no one else” as meaning I can afford that shiny new car. Instead, I take a perspective closer to Your Money or Your Life – the “live like no one else” in the future for me is complete financial independence, meaning I don’t have to work for money.
That, to me, is “living like no one else.” I won’t have to factor in money at all when it comes to choosing how to spend my time, and that’s my real dream.

A 12% Rate of Return?

One big flashing question mark comes on page xv in the preface:

Sadly, many intelligent but ignorant people seem to think that making a 12 percent rate of return on your money in a long term investment is impossible. And that if I state that there is a 12 percent rate of return available, then I have lied to you or misled you. [...] The S&P 500 is the 500 largest companies traded on the New York Stock Exchange, sometimes called “The Big Board.” So it is widely accepted to be the best average of the market. The S&P 500 has averaged 11.3 percent per year for the last seventy-plus years, as of this writing.

So, I immediately flip to the front and discover that this revision was published in 2007. Something tells me that 2008 and 2009 hurt those numbers quite a bit.

Here’s the point, though: The Total Money Makeover tends towards the optimistic when it comes to investment returns. While there are certainly long-term stretches (more than ten years) where the market as a whole – or certain pieces of the market – have returned more than 12% annually, the truth is that there is no guarantee that any 10 year, 20 year, 30 year, or any year period will return any percent. Surely, 2008 taught us all that, loud and clear.
How to Get Out of Debt, Stay Out of Debt, and Live Prosperously: *(Based on the Proven Principles and Techniques of Debtors Anonymous)
Instead of relying on that extremely optimistic forecast, I’ve come to use Warren Buffett’s more realistic (perhaps even a bit pessimistic) forecast that in the future we should expect 7% returns on average. This might be slightly on the pessimistic side, but when you’re making calculations for your future and banking on them, you’re better off being pessimistic (and having more money than you need when the day comes) than optimistic (and having to work for the rest of your life).

Calculating with 12% returns gets people really excited – and it might happen. But my perspective is that using such hugely optimistic numbers puts your future at risk. Better to finish with more than you expect than with less.

Tapes and Books Aren’t the Solution

On page 4, a certain quote really caught my eye:

So my Total Money Makeover begins with a challenge. The challenge is you. You are the problem with your money. The financial channel and some tape sets aren’t your answer; you are.

All the blogs, all the books, all the “tape sets,” all the financial products in the world won’t help if you’re not committed to sucking it up and making it work.

If you’re not willing to look at your behaviors, step up to the plate, and make some changes in your life, nothing is going to change.

This kind of talk generates three kinds of reactions. It makes some people angry – they want to believe that they can suddenly get rich without changing a thing, even though it hasn’t happened yet. It makes some people stick their fingers in their ears and sing “lalalala” – they know it’s true, but they’d rather keep the sinking ship they’re on than try to change anything. And then others embrace it and work hard for something better.
I was in the “lalalala” group for years. I knew very well what I needed to do, I just didn’t want to hear it. I knew on some level that what I was doing wasn’t working, I just didn’t want to think about it.

My epiphany threw me on a new track – the “embrace change” track. I finally woke up and realized that if I didn’t take charge of my situation, I was going to keep sinking slowly. This one choice led to tons of things – I paid off four credit cards, two vehicles, three student debts, totaling $30,000 or so in debt; I bought a house; and, finally, I switched careers, earning less but doing what I love.

All of the moves I made were simply the aftermath of that one choice to really make a change. That choice is up to you – no blog or book or podcast can make that happen (well, except for MY blog or book or podcast … just kidding).

King of Denial

The second chapter of the book focuses on denial – simply ignoring that there are problems. Like I said, I did this myself for far too long. One quote from the chapter took my breath away, though:

For your own good, for the good of your family and your future, grow a backbone. When something is wrong, stand up and say it is wrong, and don’t back down.

Powerful stuff, and exactly right. If you’re not going to take charge of things, who is?

The Pain of Change

Another interesting piece comes in on page 15:

Change is painful. Few people have the courage to seek out change. Most people won’t change until the pain of where they are exceeds the pain of change.

I strongly believe that for many people in a routine of spending more than they own, there’s a “bottoming out” effect, not too different than a junkie. At some point, the problems that have been building for a long while explode – you can’t pay the bills any more (which happened to me), you’re forced into bankruptcy, your family splits apart.

For many people, that final point is painful enough that it tips the scales. Suddenly, in comparison, the big change doesn’t seem so painful any more.

I like to think of it like the Mississippi River flood a few years back, which destroyed one of my favorite cities. It kept raining and raining and raining throughout the month of August, like debt building up. The river kept rising, pushing against the levees, until that fateful day when the levee broke. Chaos ensued and new patterns were rapidly discovered in countless lives.

Soon, we found that the actual path of the river had changed – in many places, it had found a new channel to flow through. The new patterns of life began to settle in place and soon things began to return to normal – but with some big changes. Levees were rebuilt stronger than ever. People prepared their homes for future flooding.

In short, life took on a new, better, safer routine. When you’re recovering from a financial meltdown and discovering new ways to live, this happens – you begin to discover new, better, safer routines.

And you begin to live like no one else.

Do you have any other thoughts on the first two chapters of The Total Money Makeover? Please share them in the comments – and feel free to respond to any of my impressions as well. After all, a good book club is all about discussion!

Next, we’ll tackle the third chapter – Debt Myths: Debt Is (Not) A Tool.

Independent A&R...The New Music Industry Career

2010-09-14T18:53:00.000-07:00

Every year hundreds of music business professionals lose their jobs. Some are laid off. Others are fired. The end result is the seasonal carnage that results in unemployment.

Many of those who are unceremoniously dismissed will encounter various obstacles in their search for new jobs such as age, race, and sex discrimination. Some will fair better than others due to their network of associates or nepotism. Some people will go on to become consultants. Others will start companies. Many if not most will leave the music industry altogether.

For those in the minority who really understand the business and see the big picture, they are faced with their most daunting task: re-inventing their jobs and finding ways to get paid doing it.

Enter Independent A&R into the equation.

Over the years, A&R (artist and repertoire) reps have been enigmatic figures that have been misrepresented and misunderstood because their roles vary so greatly from company to company. One fact is absolute: A&R reps employed by record companies act on behalf of the record company.

Historically, A&R reps would create songs for artists to record and perform. They were musicians and songwriters who helped find a home for goods songs with the appropriate artists, and they would also help artists get signed to labels that would be good homes to develop their careers in.

Then artists started writing their own songs. That’s when the A&R professionals had to modify their job description. Now, it’s industry consensus that A&R people do everything and nothing – often simultaneously. How can they? Or rather, how can they not? The artists that they endorse are often dropped in the blink of an eye when they don’t generate enough revenue to make a profit for the label to which they are signed.

The argument of whether or not record companies will survive or become extinct like dinosaurs is tired and should be put to rest. Record companies – or companies functioning in a record company capacity -will always exist. What no longer can exist is prehistoric thinking (which is no doubt how dinosaurs used to think) that we take in our approach, as professionals, to doing business in the music industry.

We are now dealing with intangible commodities as our product in the music industry (music, which is an intellectual property, and talent, which is associated with brands). The new digital/wireless era that we live in allows us to strip away the fat (excess) and the BS (politics) that plague and undermine the business. What we will have left when the smoke clears are the very things that the music industry was founded on: music, talent, and entrepreneurship. This represents a golden opportunity for Independent A&R professionals.

Independent A&R professionals facilitate the commercial use of that music and talent as entrepreneurs. By facilitate I’m referring to the process of helping others find, and/or negotiate the use of, music and talent in any revenue generating capacity e.g. (licensing/performance/recording, etc.).

Most artists think of their success vertically, viewing it in terms of “levels” they are on, an Independent A&R professional looks at success horizontally; basing it on a multiplicity of income streams across multiple platforms.

For example, consider producer Cori Jacobs, his core business is producing music. His productions have appeared in television shows and have been featured prominently in many films including Tupac’s biopic, “Thug Angel” and most recently, Tyler Perry’s “Why Did I Get Married.” He is also a musical director for the likes of Lauryn Hill and Malcolm Jamal Warner (yes, as in Theo from the Cosby Show). In addition, he collaborates with numerous songwriters and performs with his band, Clear Soul.

Each transaction related to the use of his music and talent(s) entail a business activity that requires professional attention and handling.From interfacing with clients seeking his services as a producer, to people who want to utilize his talent as a musical director, to the negotiation of licensing his songs for use in film and television requires someone whom will instigate and execute all of these details.

While Independent A&R is a multi-tasking occupation, and there is overlap (as there is in practically every occupation in the music industry), and you do get paid on a commission basis, you are only engaged to handle the resulting business activities stemming from the commercial use of of your clients’ music and talents; not to do hand-holding or talent development.

Perhaps most importantly, Independent A&R can help you find a purposeful and relevant place in the music industry that fully utilizes the depth of my experience and the breadth of your knowledge. By helping artists maximize the use of their talents and generate revenue with their songs, You've filled a void and found a niche in the process. Independent A&R can do you justice

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

What to look for in Music Business Managers

2010-09-14T13:28:00.000-07:00

I’m a firm believer that the longer an artist can manage themselves the better off they will be in the long run. I always encourage artists to read before rushing out to find a music management “team” early in their career. Once an artist has done all the hard work required to build a dedicated fan base they may want to consider hiring management to help grow and manage their business.

Below is an overview of some of the traditional management roles in the music business.

Artist Management for the Music Business

Manager

Traditionally, managers have spent much of their time getting their clients signed to a record label deal then working with their client’s record labels to coordinate publicity, radio promotions and retail marketing budgets and programs. Today, the desirable skills for a manager in the music industry have changed fairly significantly. Managers need to be specialist in direct to fan relationships, social media, online marketing, licensing and sponsorships. They should be generally knowledgeable in ways artists can be successful with and without a record label.

Managers should handle all the artist’s personnel issues with the band and crew members and work with the rest of their management team including the attorney, booking agent, business manager and tour manager as needed.

Managers are typically paid 15% to 20% of the artist’s gross earnings. That means they get paid their percentage on all the artist’s earnings including, royalties, publishing, touring, merchandise, or sponsorships before the artist gets paid. Some managers have multi-year contracts (that can be quite complicated) with the artists they represent and some just work on a handshake.

Attorney

Given the uniqueness and complexities of recording contracts, management agreements, publishing deals, sponsorship or licensing agreements and the various other music business related agreements attorneys can play a critical role in protecting the interests of the artists they represent. The most important thing to look for in an attorney is experience in the music business. Just because someone has a law degree (even from a top school) does not qualify them to adequately represent artists in the music business.

A good attorney with experience in the music business can keep you from making contractual mistakes they have seen that have happen to other artists. Attorneys usually charge by the hour or by retainer (a set monthly fee) and in the music business it’s fairly common for them to charge well established artists a percentage of gross earnings, 5% is typical. Russell Simmons' Higher Self Series: Hip-Hop Laws of Success

Business Manager

A business manager is the person or firm that collects monies owned to the artist from royalties, publishing, touring and merchandise sales, pays the bills, band and crew, invests the profits and files the tax returns. They handle the artist’s general accounting related needs, royalty collection & auditing and tour budgeting & reporting. Many good business managers are either CPA’s or employ CPA’s on their staff due to the complexities of the music business accounting and the challenges of dealing with multiple state and international tax jurisdictions that come into play when an artist is on tour. They also handle all financial aspects of the artist’s personal life including insurance, loans, mortgages, investments and estate planning.

Business managers typically charge 5% of the artists gross earnings in the music business but some an hourly rate or flat monthly fee.

Booking Agent

Booking Agents play an important role in the success of the artists they represent by planning and booking their tours with promoters and venues. They will make sure you are playing in venues that are known for your genre of music or booked as an opening act for bigger band. Booking agents negotiate the fee structure (guarantee, % of the door, meals, etc.), determine ticket prices and ticket availability in the market.

Thoughtful route planning is critical to the financial success of a tour and a good booking agent should make sure you are not playing in Atlanta one night, Chicago the following night and Jacksonville the next. Route planning can be a challenge for even a seasoned booking agent due to the large number of competing tours and the limited availability of quality venues in highly desirable markets.

Booking agents typically collect a 50% deposit on the show guarantee from the promoter once the show is booked. They usually charge 10% of the money the band gets paid for the show for their services. For example if the booking agent negotiates a $2000 guarantee for a show, they would collect a $1000 deposit, keep $200 (10% of $2000) then send the band $800. The band or their manager / road manager would collect the balance ($1000 in this example) from the promoter or venue after the show. This Business of Concert Promotion and Touring: A Practical Guide to Creating, Selling, Organizing, and Staging Concerts

Tour Manager

The Tour Manager handles all the details of life on the road for the artist during a tour. They will arrange transportation, hotels and meals for each stop, make sure the equipment is accounted for and maintained plus manage the crew. The tour manager makes sure the venue has the stage, sound and lighting set up as requested and that the band is paid per the terms arranged with the booking agent. They manage and safeguard the cash collected while on the road. The Tour Manager will work with the tour publicist to make sure the artist shows up on time for scheduled interviews, appearances and promotions in each market. It’s the tour manager who puts out all the inevitable fires that come up at each stop during the tour.

The Musician's Money Book: Easy Accounting Kit for the Touring Musician (Music Pro Guides)

The tour manager is also responsible for maintaining the tour plan and budget set up by the manager, business manager and booking agent. They are typically paid a salary, per diem or a set amount per tour.

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

The Danger of Assumption

2010-09-13T18:43:00.000-07:00

A few weeks ago, I had a conversation with a guy who had a large scar on his neck that looked like a swastika. The man had it partially covered with a turtleneck on a hot day. I could have easily assumed that he was a “scary” member of a fringe group, but I was sitting next to him and said hello anyway. The man seemed thrilled that someone was speaking to him, and soon I found out that he had actually been branded while serving a prison term for a car accident he had been in when he was nineteen. He was having a great deal of difficulty saving up the money to get the scar fixed. Rather than hating the man, I wound up having a lot of sympathy for his situation. He made one stupid move as a teenager and is now suffering for life because of it.

That incident has left me thinking a great deal about all of the things I assume in my own life. So often, I make assumptions about others, usually out of a need to make faster decisions. Sometimes, those assumptions are flat-out wrong, and those assumptions cost me in a lot of ways. They cost me money. They cost me time. They cost me pride and self-confidence, too. They cost me respect as well.People Skills: How to Assert Yourself, Listen to Others, and Resolve Conflicts

I’ll make assumptions about reader emails because I have 250 of them to read and only a couple of hours in which to do it (do the math there). I’ll make assumptions about what the real intent of people marketing their product to me actually is – are they shills? Do they actually have a product that’s worthwhile that they genuinely believe in? I make assumptions when I write – I assume often that the audience already knows certain things and to reiterate them would just be a waste.

Each of these assumptions seem like a good idea on the surface. However, if I make the wrong assumption, I pay for it. I lose readers. I lose respect. I lose opportunities. I lose time. I lose motivation.
Yet, without at least some assumptions, I would be utterly stuck in analysis paralysis. I would not be able to move forward with any speed with anything in my life.
The Dharma King: The Thrilling Novel of One Man's Quest to Save Tibet--and Himself

You likely make assumptions in your own life as well. We all do it. Most of the time, assumptions are time-savers that enable us to deal with a lot more of our lives. We assume that certain stores have lower prices. We assume that the people in the cars around us will make sensible traffic moves. We assume that the scary person on the bus is actually pretty scary and should be avoided. We look at people, decide who they are quickly, and make snap decisions on whether to avoid them. We pull one sentence out of someone’s long speech or document and assume that one sentence defines everything.

All of these assumptions are mistakes that can cost us money and time and energy. I’ve been thinking long and hard about how I can improve my own issues with assumptions, and here are some of the things I’ve come up with.

Don’t react with emotion. If you see something that makes you uncomfortable, rather than just reacting with pure emotion, ask yourself why you’re reacting that way. Did you see what you thought you saw? Is that really the whole picture? Look again and quell your initial emotional response.

Restate what you think the case is. If you’re going to disagree, state why you’re disagreeing with someone. Often, you’ll find that you’ve misunderstood what you’re disagreeing with, either due to poor communication skills on the other side’s part or due to poor listening skills on your own part.

Strive to be very clear with your own words. Try to eliminate any vagueness from your own statements. The more clear you are with what you’re trying to say or represent, the more clear it will be for the people who are listening to you.

Listen instead of merely waiting for an opportunity to respond. When you hear something you don’t like, it’s very easy to shut your ears or eyes and just look for an opportunity to respond without hearing the whole statement. When you see an aspect of a person you don’t like, it’s easier to run away or practice avoidance than it is to see the whole picture. You’re better off getting the full picture before responding.

If someone makes a statement that doesn’t seem to fit, ask for clarification. Often, it’s just a mis-statement or a misunderstanding. This is especially true if the person you’re talking to has a long history of sensible and positive remarks. Messages: The Communication Skills Book

Listen to clarifications and accept them. Again, many a misstatement and assumption have damaged relationships, jobs, and countless other things without need. When someone tries to clarify their statement, let them clarify and accept their clarification.

Realize that no one is perfect. I’m not. You’re not. No one else is. Everyone makes misstatements and everyone makes false assumptions. Look for times when other people do this and let it go. Forgive them for it.

Realize that you don’t have to do everything and that slower is often better. Yes, quite often in modern life, it’s impossible to slow down and take more time with assumptions. However, the more time you put into the important things, the more benefit you’ll get out of it every time. You’ll see the assumptions more clearly and find the right way to work through them. Everyone benefits from that – especially you.

I’ve made a lot of mistakes in my own life based on assuming too much or assuming incorrectly. All I can do about it is strive to do better in the future. I hope you’ll join me in that.

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

Your Resume Is Meaningless (And Building Career Security, Not Job Security)

2010-09-13T13:49:00.000-07:00

Resumes and some observations

Do you want an average job with average pay? Do you like following the rules? Are you content to settle for mediocre at best? If yes, stop reading here – this article is not for you.

For everyone else, read on.

I’m going to let you in on a secret: your resume is worthless. I don’t care how many accolades you have, how you graduated cum-lade with triple honors, or how you have managed to perfectly balance titles, subheads and content with 12-point Courier New font. None of this matters – at least, not to a smart organization, the kind of passionate organization you want to work for.

Yes, you have probably been taught all of your life that a strong resume is vital to getting a job. You were also probably taught this by people who were content to settle for average, and also bought into the game of being defined by a sheet of paper.

The best places to work for are literally littered with resumes. A daily, nonstop influx of electronic and mailed resumes run across the desks of top organizations globally. What does that mean for you if you’re one of those resumes? It means yours probably won’t even be looked at. Resumes are for people who want to be a cog in a machine, and are for those who think inside the lines.

Look, a piece of paper that someone spends four hours trying to perfect is not what I would want to see if I owned an organization. It’s meaningless. What would be far more impressive is if someone submitted a case study on a remarkable project, a well-crafted power point on themselves, or simply a link to a blog or website they created showcasing their work – you get the idea.Self Marketing Power: Branding Yourself As a Business of One

There are so many fantastic ways you can be creative in this space and prove you would dominate any of your competition in skills and value. Prove you’re exceptional through something tangible. You’ll also get the initial dialogue open much quicker this way.

Also, that cover letter you submitted along with the resume gushing praise for the organization and talking yourself up doesn’t prove a thing.

The extraordinary and the remarkable go deeper

By submitting a resume and a cover letter to an organization, you’re already setting yourself up for disappointment and mediocrity from step one. How others perceive us is simple: it’s purely based on our actions. You don’t make a great initial splash with a piece of paper. It’s just not impressive, sorry.

Assuming everything else is equal (most of us here have college degrees and great backgrounds with reputable organizations, along with references who will talk us up) – a piece of paper isn’t going to help you. If the people hiring you are merely looking at resumes to find their candidate, you probably don’t want to work for them anyway.I would checkout The Resume Writers Workbook, 3E, Marketing Yourself Throughout the Job Search Process

Your dream job is being held by gatekeepers who are creative and intelligent people. They want more people like themselves to work with and be a part of their organization. If you really are that special and are that candidate – prove it, show your passion, and go the extra mile.

Not job security, but career security

This advice applies to everyone looking for a job or not looking for a job. You can be perfectly happy working somewhere and still continue to build your personal brand. It’s the best thing you can do to move ahead in life and is something you should take pride in. In today’s world, being agile is the smartest move – as the economy and industries are in constant flux.

People talk about the importance of job security, but that is meaningless. There are plenty of jobs – if you’re really that good you’ll find another. Career security is far more valuable. And, you achieve career security through building a strong personal brand.

Side note: You should live everyday at your job with absolute zero fear of anything – you’ll get the best work done. Be unafraid to make mistakes and be unafraid of the consequences and you will produce the best, most interesting results that haven’t been dulled down. The rockstars at every organization are the ones more concerned with developing their skills and a career. A job is just part of this.

Here are a few steps that should help get you on your way to building your personal brand and showing the world that you are, in fact, a standout person. Yes, your current employer may know you’re great, but now that technology has enabled you to spread your accomplishments effortlessly, shouldn’t the world know?

This also moves you in the direction to be able to ditch that resume (the old way), and demonstrate clear social proofing that you’re a step above the rest (the new way).

If you’re not willing to do these steps and follow-through with them, you probably should keep the resume and continue down the path you’re headed. However, for those with true passion, you can embrace new tools to create great power, freedom and influence for yourself and allow you to soar to success in your career:

Build your influence through blogging

Influential, passionate people in all industries are blogging. The top minds have developed a following of readers and are trendsetters and thought leaders for their specific industry.

Keep case studies of all your projects

To me, these are vital to building your worth and showing what you’ve accomplished in a tangible form. If you can get permission, blog about them and share your accomplishments with your readers and the world.

Use the web to build your personal network

Use Twitter, LinkedIn, Facebook, FriendFeed, etc. to develop relationships with people in your industry who will be there for you (and you for them) when you need advice or are looking to change career paths. You need to build your network long before you need to tap it, so again even if you aren’t looking to switch jobs or fields; this is something smart to do for yourself. You also never know what kind of opportunities will float along to you through them.

Contribute articles to trade publications and industry blogs

This is a fantastic opportunity, especially if you’re still an unknown star in your industry. If you’re interesting and doing something unique – contact your industry trades and ask them nicely if they’d consider doing a write-up. You’d be surprised how open the trade writers are to work with passionate people who approach them directly. If they say no, at least you tried. Plus, there are plenty of outlets, don’t get discouraged, keep at it, and you’ll definitely find an opportunity.

Mentor/help others in your industry

This one is more for building direct, personal and strong relationships than anything you can document directly. But, the documentation isn’t the point here, the point is to give back and help those who are just starting out. Recall those amazing people who helped you when you were starting out – now it is your turn to help them. This is done purely for intrinsic reasons, and for the good of the world. I’m a huge supporter of helping people/mentoring and believe it to be one of the most important things you can do in life. I have done it in both the music world and the marketing world and it’s one of the most rewarding things a passionate person can do.

Why this matters, doing something you’re passionate about, and not wasting your life

Most people probably won’t do any of this, and continue down the path of not building their personal brand aside from adding a few new lines to a resume. This is exactly why it’s a huge opportunity for you, someone who cares about developing your personal brand in the world and creating a reputation for yourself.

I’m in my 30's –and I’ll be honest in what I notice about my peers across industries: most of them just do what it takes to get by and that’s it. I’m not picking on any one person in particular; I’m just saying what I observe.

And, I think the problem goes deeper – people like this simply are not in an industry that they love, but think it is too big of a step to switch (it’s not). If you don’t look forward to what you’re doing everyday, make a change. I’m not necessarily saying quit your job, but talk to your superiors and tell them, be honest, they’ll respect that. If they aren’t willing to work with you and switch you to projects you dig, they probably aren’t the organization for you anyway. There is too much opportunity and too little lifespan to waste time doing things you don’t like.

Nine to five is for people who hate their jobs. If you love your job – you get excited to work on projects and are willing to spend time passionately on them for hours on end, as the end result is exhilarating. If you’re not excited working on projects, or you’re not being compensated fairly, it is time for a change. Ask for it, and if you’re that valuable, you’ll get it.

Building your personal brand and personal network affords you the freedom to do all of this and so much more.

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

Your digital reputation is key

2010-09-13T11:16:00.000-07:00

Today I wanted to discuss the importance of your digital reputation. Specifically, I want to talk about how you can protect it, how to nurture it and how to avoid missteps which can potentially ruin it. The truth is, your digital reputation is your real world reputation.
Recall law 5 from Robert Greene’s The 48 Laws of Power

Law 5 So Much Depends on Reputation – Guard it with your Life
Reputation is the cornerstone of power. Through reputation alone you can intimidate and win; once you slip, however, you are vulnerable, and will be attacked on all sides. Make your reputation unassailable. Always be alert to potential attacks and thwart them before they happen. Meanwhile, learn to destroy your enemies by opening holes in their own reputations. Then stand aside and let public opinion hang them.

Your reputation as a marketer, blogger, journalist, musician, poet or any variety of digital professional is your greatest asset. Personal PR really matters, especially in an environment where titles are altogether meaningless. It’s vital on several levels:

Personally – you are a company of one and your reputation follows you everywhere you go
For the company/agency you work for – what you say publicly on the web is tied directly to the reputation of your employer
For clients – your clients can and do read content you put out on the web on any of your social outlets

The obvious examples of reputations being ruined are people losing their jobs from inappropriate/unprofessional photos on their social networking profiles. Sadly, many do not realize those are public spaces. But what’s not so obvious is negativity or attacks on other companies or professionals in a manner which is derogatory and/or unprofessional.

I’ve written before not to be afraid to have opinions or take sides, and I stand by that. But, discussing something intelligently and backing up what you’re saying with facts, observations or opinions is a far different animal than being outright negative to someone you disagree with merely because they rub you the wrong way.
People who do this only succeed in:

Making themselves look unprofessional
Undermining their own company’s reputation by representing them poorly
Burning bridges with future employers who have seen the negativity (the web, especially within niches, is a small space and when you post things publicly the world is watching)
Ruining the chances that their own content is actually shared
Slowly degrading their own reputation, authority and trust

There’s far too much negativity in the world, and smart businesses and professionals want to keep themselves as far away from negative attitudes and mindsets as possible. This leads us to the paths for your own success in cultivating the right kind of reputation for yourself:

Being a positive force and thoughtfully contributing is the right path

Look at thought leaders like Chris Brogan or Seth Godin. One of the reasons for their amazing reputations is the fact that they are an overwhelmingly positive force in a negative world. People crave those who inspire them, and both of these individuals do that with stars. The right kind of leaders are never negative.

Debate and disagreement are fine, but should be conducted professionally and with tact

You can debate, you can have opinions, you can align yourself with ideas you believe in. But you can do this without embarking down a slanderous path. There’s a fine line between intelligently pointing out things that are wrong and being unprofessional. Steven Hodson at WinExtra is a master at being snarky, but if you read what he writes, he carefully backs up his points in a way that even if you didn’t agree with him, you’d still respect him. Snark done properly is a style, and not necessarily negative.

Contribute to discussions on your industry in the same manner online as you would in person

A simple formula is this: if you wouldn’t say something in person to someone else’s face, don’t say it on the web. We’ve blurred the line between online and offline and many of us who have been online daily for more than a decade see no difference at all. If you say something about someone, especially something negative, count on that person both reading it and reacting.

Any fleeting attention gained from negativity is overshadowed by the destruction of your reputation

Being a PR professional, I’m familiar with the phrase all PR is good PR. And I think that is absolutely true for companies or individuals who have strong, unassailable reputations, loyal followings and in the end are on the good side of the force. It’s when you personally draw attention to yourself in the wrong light and for the wrong reasons the attention you gain is not worth the dent in your reputation.

Authority/trust is different than popularity

You can be insanely popular, but have no trust or authority in the world. While you might be able to court attention, it’s worthless if at the end of the day people don’t respect you or view you as an authentic individual. Authority is built slowly over time bit by bit.

Nobody likes an immature expert

You could be the best in the world at something – but if you’re immature, people aren’t going to look forward to working with you, plain and simple. Mature individuals are virtuous in their actions, even when they disagree.

The web doesn’t forget

The web is permanent, and anything you say is etched into a digital presence that isn’t easily removed. Upset the wrong person and you could end up with a scar on page one of Google for your name that stays with you for a long time. More than half of adults Google each other, so this is a real problem you could make for yourself if you don’t think about your actions carefully. This also speaks to the importance of having a large digital footprint and owning your personal SEO so a spiteful individual could not easily harm your reputation in this regard. I recommend reading Marketing in the Age of Google: Your Online Strategy IS Your Business Strategy

Everyone knows there is snake oil in social media/digital marketing and PR

Both your proven track record and reputation are what allow you to stand out from the hordes of “experts” in the space. In reality it is a small inner-circle of talented individuals who are proven leaders at web-based marketing, and for the most part they are all friendly with each other. It is telling if an individual is totally unknown to those at the head of the industry, or immediately known as having a negative reputation.

Know that an attack is inevitable

Even if you do all the right things, eventually – for whatever irrational reason - someone will attempt an attack on your digital reputation. Just consider the source first, and carefully weigh whether it’s even worth paying them attention. In many cases, the individual attacking you may just be trying to get you to strike back to use the attention against you. Where it’s an unknown/untrusted individual provoking you without just cause, taking the high road and ignoring the instigator may be the most prudent move.

Conclusion

The importance of your digital reputation can’t be stressed enough – especially during times when companies are assessing their partners and agencies are laying off individuals. We’ve seen examples time and time again of both professionals and companies making unfortunate missteps. Being thoughtful in what you publish, a positive force for good, and engaging others tactfully goes a long way in positioning yourself in the right light. If you have time get this book The New Rules of Marketing and PR: How to Use Social Media, Blogs, News Releases, Online Video, and Viral Marketing to Reach Buyers Directly, 2nd Edition

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" and co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter

The New Demo Tape

2010-09-09T13:53:00.000-07:00

By Mike Pineau

From the minute a shaggy-haired kid plugs his slightly used guitar into his slightly used amp, frailly strumming his first chord, he dreams of making it big - selling out stadiums, buying mansions, decorating said mansions with endless platinum records. Like most kids, he dreams of being discovered by an A&R scout through his band’s demo tape. In the case of A&R scouts, the same applies in a sense. The twenty something dreams of getting the demo of the next big thing, making his bosses happy and getting that big chair and that big office.

"In the digital age, the... demo tape is not dead."

In the digital age, the traditional demo tape is not dead. Calling anything non-human dead is foolish. Just ask vinyl collectors. However, the traditional demo is no longer the best way for a band to get exposure. Sure, there have been artists signed on the strength of their demos this year. The industry is too massive to exclude such a thing from happening. Although all four majors refuse to accept demos for a variety of reasons (mostly attorney-driven), many indies still do, relying on armies of interns to listen to the first thirty seconds. The truth is that the sheer amount of music being made in what I call the “Garageband Era” - an era of mass, high-quality bedroom recording on a shoestring budget - makes the traditional demo submission route grossly ineffective. Artists should still have a demo available, but submitting it to labels without a prior relationship there, even if the songs are amazing and life changing, is generally a waste of resources and postage.
Facebook Marketing: An Hour a Day

The best use for these “old school” demos can be found in fan-to-fan promotion. Handing out demo CDs after shows, hiding flash drives in random places and placing download cards on cork boards can slowly gather a crowd, boost name recognition and establish a “brand” of fans that acquire the music and take a personal stake in promoting an artist. These are the same fans that wear artist shirts, talk about music with their friends and record cover songs. Having an established fan base would definitely make an artist more palatable to a label which has its pick of artists that it could sign. Demos are still useful for cultivating this relationship.

In terms of making an artist visible to a label, for the past ten or so years, the answer has been MySpace; it has become a cliché. Many artists create pages on the site before they even write a single song. Many people still consider MySpace to be a music destination, but today this mostly applies for artists looking to maintain a fan base, not establish or grow one. MySpace as a tool to connect artists with A&R scouts has become largely ineffective for several reasons. First, because of the “Garageband Era” of music, the sheer number of artists on MySpace make the site ineffective for music discovery. Also, there are many artist profiles without a single song in the music player, yet they may have thousands of friends and pages of pictures. In addition, many artists choose to promote by spamming the comments of more popular artists hoping for a click through. Some include a flash player in their comments to override the artist’s own player. The number of active users on MySpace is also declining compared to other social networking sites and MySpace has been slow to make changes in response to the decline, especially in regards to artist profiles. Colbie Caillat and Owl City may have found fame through plays and friends, but the time of MySpace for artist discovery has largely passed.

"Twitter is not the future of digital A&R - yet."

The emergence of Twitter in the last couple years has led to speculation about the possibilities of artist discovery through the service. I recommend reading Twitter Power 2.0: How to Dominate Your Market One Tweet at a TimeWithout native audio, video and photo sharing capabilities, Twitter is not the future of digital A&R - yet. It most certainly could be, but as is the service has the most use in growing and maintaining artist-to-fan and fan-to-fan relations. Fans could use Twitter to spread the word about the great artist they just heard. Trending topics could be spurred by a lyrical meme. The service is still in its infancy as an artist discovery engine though. It runs the risk of becoming a marginal player in artist discovery unless the service adds more features for artists to connect with fans and, ultimately, labels.

With MySpace largely being left behind and Twitter still part of an undecided future, digital A&R should look towards video. In a sense, they are already there, but it has yet to be fully embraced. YouTube, the popular video sharing site owned by Google, is the best artist discovery medium available for the Garageband Era. A&R departments need to pay closer attention to YouTube. It should not be a mere part of an A&R or marketing strategy, but a central component. Of course, this does not just apply for discovering artists, but also for promoting their debuts and extending their careers.
Justin Bieber has probably been the best example of YouTube being used for artist discovery, albeit unintentionally. Justin’s mother posted videos of her thirteen year old’s singing on YouTube. Island Def Jam scout Scooter Braun was doing research on another artist when he accidentally clicked on one of Justin’s videos. He tracked the young Canadian down and got him an audition with Usher and later with L.A. Reid. He later was signed to Island. Bieber has continued to embrace the service that enabled his discovery. His video for ‘Baby’ is the most viewed music video on YouTube of all time and many of his early videos - including the one seen by Scooter Braun - have enormous amounts of views, which further serve to promote his career.

The way Bieber was discovered is the way many users discover videos on YouTube - by accident. On YouTube, users go searching for one thing but may end up seeing another, related video - even if the relation is only that other users also accidentally clicked on the same thing. Of course, not all videos on YouTube are clicked on by accident. For some, it’s curiosity.

"In the case of Susan Boyle, curiosity drove popularity."

In the case of Susan Boyle, curiosity drove popularity. A video of spinster Boyle performing on Britain’s Got Talent in the UK slowly gathered views and others clicked because of the growing views. YouTube allowed Boyle to establish a fan base in the United States, an entire ocean away from where Britain’s Got Talent aired. She went on to sell four million albums in the US, an astonishing number in the Garageband Era. Boyle’s fan base is much different from the tween fan base that Bieber has gathered, which shows that YouTube connects with younger and older audiences alike. A&R in the digital age should look towards YouTube to find these artists and connect them with audiences regardless of what demographic is desired.

YouTube: An Insider's Guide to Climbing the Charts

The power of YouTube also reinforces the best way that artists and A&R scouts can connect to each other - live performances. Not just okay live performances either, but highly tuneful and well rehearsed performances that show that artists are ready for the big time. Search for Tyler Ward, Julia Nunes, Emily Elbert or James Dupre. YouTube allows A&R departments to see videos of these performances from their offices and to see the potential in an artist. A demo CD, a MySpace URL or a tweet offers little in comparison. YouTube is essentially the new demo tape. A&R departments should realize the power of YouTube for artist discovery and promotion, instead of just using it as a place to host music videos. It is the Garageband Era’s central artist discovery medium and, along with live performances, the best way for labels to discover and assess an artist’s viability.

Why You MUST Create Your Brand If You Want To Build A Successful Digital Career

2010-09-09T13:49:00.001-07:00

It still makes me want to cry at night to see so many people trying to establish their online career, while missing out on the essential:

You are a brand, whether you like or not.
The question you should ask yourself:
Am I creating a bland brand that’s forgettable, or am I creating an unforgettable killer epic personal brand that shines brighter than a thousand suns ?

This is a bit of the top, but if you treat your online presence like a brand, you have many advantages :

You have a crystal-clear vision

Most people are confused. They really are. When they start their building their online presence, they have no clue what their core message is. What do they stand for ? What’s they unique story ? If they don’t know, then the readers and clients don’t know, and that means hasta la vista digital career.

Every good brand has a mission or a story that’s worth talking about.
They know what they stand for, which makes it easy to create rabid fans and blazing hot business opportunities.

You own a great digital presence

Well-created brands have a stronger presence. It’s not my opinion, it’s fact. Those peeps and companies get talked about…everywhere. Fans are spreading their message via tweets, Facebook-shares and articles.
You know how you call that ?
Free mass marketing.
All You Need to Know About the Music Business: Seventh Edition

You stand out from the crowd

There’s a word that every average entrepreneur fears: competition.
If you are like everyone else, you have to compete against everyone else.
And if you happen to be in a popular niche, you can imagine the nightmare you have to go through. You against the rest of the world. Well, good luck with that.

But if you are an incredible brand, you have way better chances.
You are easy recognizable. People remember you. There may be thousand others in your niche, but that doesn’t matter.They fade away by the shiny rays that emit from your unique brand.

You can charge…Way more

I can see the dollar signs shining in your eyes already, but it’s true: cool brands can charge more. Way more.
How many internet marketers are out there that teach you how to sell more stuff online ? Thousands. How many launch coaches are out there ? Mmm, I can give you one: Dave Navarro .
This guy is kicking digital ass on every level.
Why ? Because he built himself a killer brand, and found ways to make himself stand out in an over-crowded niche.
He has a short sharable story. His design is unique. He’s networking with influencers. He’s producing killer content flavored with a take-no-prisoner style. He’s helping people get what they want.
In short – he’s a Gorilla sized digital brand, which allows him to charge 250$ for a consulting hour. Nice one.

You enjoy stellar options in dark times

Your money is super-tight, but you need either a kick-ass ebook or consulting ? Whom will you bless with your green gold – the cookie-cutter what’s-his/her-name-again or the maverick of his niche ?
The answer is clear like the smile of the Buddha. You go for the best branded person – the one people know and trust. Guerrilla Music Marketing Handbook: 201 Self-Promotion Ideas for Songwriters, Musicians and Bands on a Budget (Revised & Updated)

You have access to magical opportunities

My brand is getting more popular – I get featured on lists , make interviews and enjoy creative project offers in my inbox. That’s white magic, right there !
Now, I’m not saying that to brag (maybe a little), but to show you the epicness that happens when you spread your digital influence.
I’m still at the beginning of my journey, but I get so many opportunities every week my brain barely keeps up with it. The same can happen to YOU !

A cool brand commands more influence, and that results in people wanting to work with you. The possibilities are endless – you can get more clients, build joint ventures and/or receive job opportunities etc.
Space’s the limits here.

Conclusion…Super Tabbin Duper !
Seriously, I could give you a trillion more reasons why it’s essential to build your brand, but those are the major ones. Crafting your online brand is ass-kicking on every dimension.

If you haven’t start branding yourself digitally, you need to do 2 things right now:

1) Slap yourself in the face
2) Start one thing today that will spread your influence, like reading this blog ;)

What do you do for your personal brand online ? How do you spread your influence every single day ?
What They'll Never Tell You About the Music Business: The Myths, the Secrets, the Lies (& a Few Truths)

Mr. Dangerfield is an I.A.P.D.A Certified Debt Specialist whom has worked in the finance industry for over a decade. He manages www.beingbrokesuckstoday.com , is the author of "A Dangerfield Manifesto" & co-founder of SMG Holdings, the parent company of Squad Music Group, Dangerfield Artistic Entertainment,SMG Publishing and Taboo Dangerfield Publishing Follow me on twitter