Money Music 101

Lady Gaga Should Read Money Music 101

2011-05-28T14:36:00.001-07:00

Dull, inanimate, and invoking complete boredom is probably a common first impression of musicians glancing at the average finance journal. Unless you are deeply immersed in financial markets, papers like the Wall Street Journal or the Financial Times are not your preferred reading material. Every now and then however, there are moments of glory when music and finance come together in the form of an article that speaks to both left brain and right brain.

One of these moments was the highly anticipated interview of Stephen Fry with Lady Gaga in this week-end’s edition of the Financial Times. If not for Lady Gaga, do yourself a favor and read it anyway. Stephen Fry, a “quintessentially English” actor, who also happens to be a fascinating writer well-versed in the subtleties of sarcasm, always leaves an impression and a smile on your face.

You may or may not approve of Lady Gaga’s flamboyant public persona, or of the music that has been described as rather madonna-esque, but the Pop Diva is a force to be reckoned with in the entertainment industry. Her new album “Born This Way”, which could be downloaded for 99 cents at Amazon this week, brought Amazon’s sever to a stand-still; it is projected to sell a million copies within the first week. Her last major world tour in 2009 was said to be one of the most successful promotional tours ever and yet, it was one of the least profitable ones too. In her own words:

I put everything in the show, and I actually went bankrupt after the first extension of The Monster Ball. And it was funny because I didn’t know! And I remember I called everybody and said, “Why is everyone saying I have no money? This is ridiculous, I have five number one singles – and they said, ‘Well, you’re $3m in debt.’

How could that be possible one might ask. A major recording artist running out of money, going bankrupt?

Well, it’s not the first time. The list of famous musicians that went bankrupt rivals any guest list at a red carpet Hollywood event. But poor money management skills are not limited to musicians only. Famous artists, movie stars, athletes and even some businessmen had to appear in bankruptcy courts. Their money problems were not caused by an inability to make money. They all made plenty of it, often tens of millions each year. Yet, the rules of finance apply to the big stars just as they apply to you and me. The only way to get financially ahead is to spend less than you earn. “It’s not what you make but what you keep!”

In Lady Gaga’s case, the scary part from a financial perspective is the fact that she was technically bankrupt and “she didn’t know.” Granted, things get slightly more complicated when you have to manage a larger pile of money and essentially run a multi-million dollar business. But there is no excuse for “not knowing” at least a rough ball park figure and to put a stop on spending sprees before it is too late.

When Lady Gaga says “It’s honestly true that money means nothing to me” take a moment and consider the validity of her statement. It sounds like the most often quoted lie of successful people. Money always means something to them or else they would not spend much of their waking hours accumulating more of it. The value of money just has different meanings to different people. To someone living on the streets, $5 could mean the difference between having a meal for the day or going to bed hungry. To a young billionaire like Mark Zuckerberg, founder of Facebook, the difference between $5million and $10 million might cause him nothing more than a lame yawn. No matter who you are, whether you live on the streets or in a $30 million mansion, the rules of personal finance apply. If you can remember to spend less than you earn, you will get financially ahead!

As for Lady Gaga, she should consider learning the basics of personal finance. She could start by reading Money Music 101.

Would someone kindly recommend it to her?

Money Music 101 on Kindle

2011-05-24T14:50:00.001-07:00

Money Music 101 is now available as eBook on Kindle.

Instant download via Amazon only $9.99

More International Sites for Money Music 101

2011-05-15T18:52:00.001-07:00

Good news for our international readers:

Money Music 101 is now available in the following countries:

Money Music 101 Amazon UK and Amazon Germany

2011-05-04T14:29:00.000-07:00

Great news!

Money Music 101 is now available on Amazon UK as well as Amazon Germany!

Here's the book on Amazon UK

Here's the book on Amazon Germany

US orders are always available here:

Five Things Every Musician Should Know About Personal Finance

2011-04-25T09:26:00.000-07:00

Dealing with one’s finances can be a daunting task. However, learning the basics and using a consistent approach to managing your personal finances, the task is not all that difficult after all. Below are the five most important finance concepts every musician should know.

1. The Time Value of Money
Despite recessions, deflation threats and falling house prices, a dollar today is worth more than a dollar tomorrow. This is really one of those big dilemmas in the world of finance because you have to make a choice between something of value (your cash) for another thing called time. You can’t have both at once. You either spend your money now or you save your money and spend it later. If you wait and spend it later you want your money to grow over time and be rewarded for not spending it right now. Otherwise, why bother waiting knowing that your dollars will buy you less over time. Can you see that time has value? How much value is better understood once you appreciate the power of exponential growth and how it applies to interest.

2. Compound Interest
Albert Einstein once said: "Compound interest is the greatest mathematical discovery of all time." Yet, everyone seems to memorize his famous E=mc2 in favor of the good old compound interest formula. What was that formula again? Here it is: P_n = P₀ (1+r)ⁿ

Where, P_n = Future Value, P₀ = Present Value or Principal, r = interest rate (per year), n = time (in years) a.k.a. compounding periods

To really appreciate the power of compound interest let’s call it by its real name: Exponential interest. Exponential interest is based on an exponential function with the value for time being the exponent. For longer periods of time, the exponential increase of the interest amount becomes all the more clear when comparing it to a linear growth rate, the much more intuitive way of looking at increases over time.

This can have particularly devastating effects when underestimating the power of exponential interest for credit card and other debt. Understand the exponential function to get a sense of how the power of compound interest can make or break you.

3. The Rule of 72
The Rule of 72 is a simplified way to estimate how long an investment will take to double, given a fixed compound interest rate. Here’s how it works:

72 ÷ interest rate = # of years it takes to double your money

For instance, if you could earn 6% return on an investment each year, it would take approximately 12 years (72 ÷ 6 = 12) to double your money. If you are a guitar player, the number 72 should ring a bell. In case it doesn’t, please consider the Guitar Player’s Rule of 72.

4. Understand Credit, Debt and Leverage
Consumer credit, credit cards and various ways of financing have become an essential part of today’s economy. No industry has been untouched by the pervasive use of credit and the global economy would come to a standstill if credit were to dry up completely. During the financial crisis of 2008/2009 we saw a glimpse of what could happen when the well of instant credit dries up.

It is essential to understanding how interest and financing charges on your credit cards and loans work. But it is equally important to limit the amount of overall debt. Credit can be a tool just like a lever; it can multiply your purchasing power. The downside however, is also clear. If you use leverage to purchase depreciating assets like consumer goods and electronics, you may find that the amount of debt you took on can be overwhelming.

I use credit cards for their convenience and for some of the benefits they provide. In essence, credit cards give you about 20 days to use their money without any interest charges. The tricky part though, you should be prepared to pay back any outstanding balance in full when it’s due. That takes a lot of discipline. More often than not, you may only have a partial amount of the payment available and try to catch up making installments as you go. Credit card companies are banking on your inability to pay back the money they lend you. Be very careful when you purchase goods with a credit card. Only ever charge something to the card when you know that you can pay it back in full at the end of the month.

5. Plan Ahead, Budget and Live Within Your Means
Planning and budgeting are essential concepts when it comes to managing your personal finances. It’s all based on the notion of living within your means. As they say:

It’s Not What You Make, It’s What You Keep!

Making a ton of money does not mean that will remain financially successful. Just do a Google search for famous bankruptcies or bankrupt musicians. You will get a list of names that rivals any guest list at a red carpet Hollywood event. Their money problems were not primarily caused by an inability to make money. These artists all made plenty of it, often tens of millions each year. Yet, they spent more than they earned and therefore ended up in bankruptcy court.

Learning how to establish and keep reasonable budgets is the key to living within your means and to get financially ahead. Musicians and independent artists often have highly fluctuating incomes. They can make a ton of money for a few months only to experience a dry spell and earn substantially less during the following months. For instance, a musician may go on tour and earn quite well. When the tour ends, the regular payments end as well.

Who knows, that one project that wasn’t going to pay you until completion 4 months down the road could be the most important musical project of your career. But without having enough of a financial cushion, you will simply not be able to afford the project that might make you as an artist.

Summary
Taking care of your personal finances is not rocket science but it does require some work, lots of discipline and a healthy dose of common sense. Musicians know all about discipline and hard work. Nobody wakes up one day to become a great violin player or pianist. It takes years of practice. Similarly, it takes some practice and some time to learn how to manage your finances. Start saving early, spend wisely and always live within your means. Your financial success depends on it!

Credit cards and “Savings”

2011-03-12T11:11:00.000-08:00

As you may know, credit card companies have to display the following warning on your credit card statement:

Minimum Payment Warning: If you make only the minimum payment each period, you will pay more in interest and it will take you longer to pay off your balance. For example:

While this is a very good development raising some awareness about the dangers of borrowing too much debt, notice the subtle word “Savings” in the last column. Very clever marketing which draws attention away from the better choice: You should always pay off your credit card debt in full every month!

Yes, paying off slightly more than the minimum amount is better than paying only the bare minimum but it is still making the credit card companies far too much and far too easy money and it’s costing You the credit card holder a fortune in interest expenses.
Instead, one should consider to either pay the full amount now ($564 in the example above) or pay a total of $816 within 5 years.

You DO NOT save by paying anything less than the full payment today but you may make the credit card company a little less money by paying a slightly higher amount than the minimum payment. Still, the credit card companies would rather you pay them in incremental amounts. As attractive as it may sound (Savings), you are better off facing the music now than later.

Let’s look at this from another angle, using the rule of 72 that we mentioned in a previous post:
At a typical rate of 20% for finance charges, credit card companies (not you) can double their money they make from you every 3.6 years and here’s how...

72 / 20(%) = 3.6 (years)

Sounds like a real good business to be in...and a bad deal if you don’t pay your credit card balance in full. Keep an eye on those charges and pay your credit card balance in full every time!

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens@moneymusic101.com

Please help us spread the word and promote financial literacy!

The Rule of 72 in a different light

2011-02-13T11:50:00.000-08:00

We previously discussed the the Rule of 72 as a simplified way to find out how long an investment will take to double at a given interest rate. Here’s how it goes:
Divide 72 by the given interest rate and you can find out how many years it will take double your money.
The Rule of 72 also works in another way; you can find out the exact interest rate or rate of return needed if you wanted to double your money within a certain number of years. You can rework the Rule of 72 like this:

72 ÷ # of years = the rate needed to double your money

Here is an example:
Let’s say you saved up $5,000. Now you would like to double that amount in the next 6 years but you are not sure what type of investment or interest would be needed to achieve that goal. Let’s plug in the numbers...

72 ÷ 6 (years) = 12 (%)

Solution: In order to double $5,000 in 6 years time, you will need to find an investment giving you a compounded annual return of 12%.

Really simple stuff, but you should consider using this as a gauge when looking at your own financial planning. If your time horizon is say 10 years, remember that you need about 7% of compounded annual return to double your money. This might come in handy when you talk to your broker the next time.

The Guitar Player’s Rule of 72

2011-01-15T11:06:00.000-08:00

We discussed the Rule of 72 a few times before, click here if you missed the previous discussions. If you’re a guitar player, the number 72 should ring a bell. In case it doesn’t, let’s take a look at something that everyone should recognize immediately:

You guessed it – an image of a guitar fret board. 72 still doesn’t ring a bell? Well here we go...
There are 6 strings and 12 frets (the traditional range where about 90% of the guitar playing activity takes place). 6 x 12 = 72.

Next time you wonder what was that number again that allows me to quickly calculate the doubling times for investing my money? Think of the guitar and 6 strings multiplied by 12 frets = 72 notes.

Here’s the Rule of 72 one more time:
Take the number 72 divide it by the interest rate to find out the number of years it takes to double your initial investment at that given rate. The formula looks like this:

72 ÷ interest rate = # of years (it takes to double your money)

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens@moneymusic101.com

Please help us spread the word and promote financial literacy!

Tis the Season...

2010-12-05T10:49:00.000-08:00

Tis the Season indeed… not only to be jolly but instead to be watchful for the many financial traps that usually surface around the holidays. One of the biggest traps these days are prepaid giftcards as my daughter recently discovered when she received a well-meant giftcard for her birthday.

Marshall Bank N.A. issued a "Vanilla" Visa card with prepaid amounts of $25, $50 and $100. Unless you read the fine print, you may find out rather painfully that prepaid giftcards often come with horrific fees.

Many of them have expiration dates so your money is not going to last forever. Then there are those "service fees" which are of course nonsensical because there is no service for those cards. The Vanilla visa card charges $2.50 per month after 6 months from activation.

The most appalling fee however, is an activation fee of up to $4.95 for a $25 gift card. That’s almost 20% right off the top which in my humble opinion is completely unethical. At the same time, the Federal Reserve came out with new rules for giftcards just this summer. The new rules are meant to provide protections for buying and using these giftcards. You can read up on those rules at the Federal Reserve's Website: http://www.federalreserve.gov/consumerinfo/wyntk_giftcards.htm

Granted, the Fed put restrictions on some of the many other fees these banks used to get away with. It still beats me though how a 20% activation fee can be tolerated.

My advice in all this: Prepare a self-made gift, something of real inherent value and stay away from those ridiculous and impersonal money sucking gadgets called giftcards. If your friends and relatives wonder what you might want for the holidays, ask them to contribute to your savings account or to invest in your career instead. That means less money for the retailers but more resources towards your career.

Happy Holidays!

Creativity & Finance

2010-10-20T09:41:00.000-07:00

As a former musician, I have sometimes looked at the music industry with a sense of dismay. Disillusioned by an apparent lack of creativity in much of what has been put in front of consumers ears in recent years, I often wondered what happened to all those creative talents, those musical "outside-the-box" thinkers who have blessed us with so much musical joy in the past?

Some of those creative minds must have gone into banking and financial services. It is rather apparent how "creative" the financial services industry has become - creative in terms of finding new ways to circumvent new rules and to "milk" consumers. Today's Wall Street Journal has a good example of how some companies have become adapt at finding loopholes. Please consider: Fed Aims to Tighten New Rules for Credit

As the article notes:

The proposed rules also address fees frequently tacked onto cards marketed to people with weaker credit histories. The credit-card law, targeting confusing offers that often drew lower-income customers to sign up for costly credit, limited fees to no more than 25% of a card's credit line in the first year.

First Premier Bank has since offered a card with a $300 credit limit and $75 annual fee, plus a $95 processing fee that must be paid before the card is used. The bank, which didn't respond to requests for comment, told The Wall Street Journal earlier this year that the 25% limit only applied to fees charged after an account was opened.

Whether you are a musician, an artist or any other consumer, you have to watch out. Creativity is great in music and in art, but it can have its downside when you let bankers get a hold of creative thinking.

Perhaps it's time to switch roles and have artists put on a banker's head for a change. That analytical mind would do them well and should keep them away from ridiculous terms as described above. Don't forget it's your money. Don't let these credit sharks get a hold of it!

A Spending Diary

2010-10-08T11:01:00.000-07:00

Most of us are familiar with Weight Watchers through commercials or actually having tried one of their weight loss programs. It's a great concept that works on a simple principle: "Watch what you eat".

How about using the same premise to "Watch what you spend"?

We have an easy one-page work sheet that you can use as a budgeting tool to track where your money is going. You are far more likely to save money when you see how fast the small things that you buy here and there can add up.

Click on the image below to see the full-size work sheet...

The best way to do this on a regular basis is to combine if with another daily routine e.g. brushing your teeth. While you brush your teeth, do a mental recap of your daily expenses. This helps you remember where your money went. But make sure you write down what you spent immediately after brushing your teeth. You should include everything, even the dimes and nickels!

After a month of tracking your expenses, go over the completed sheets and try to figure out where you spent too much money on by evaluating each expense.

As they say, seeing is believing. Once you actually see where your money goes you may be shocked to find a number of items that were unnecessary, perhaps frivolous expenses. But you have made the first step in getting a better grip at your finances.

Keep the exercise going; this will help you later on in establishing and maintaining your own personal budget.

If you would like a printable version (PDF file) of our work sheet please email: clemens.kownatzki@fxistrategies.com

Don’t Forget: Your Bank Controls The Rates!

2010-10-04T15:21:00.000-07:00

In most finance or investment tutorials, the interest rates and percentages typically used for scenario calculations are always a bit on the high side when it comes to the stated investing returns. Particularly in the current economic environment with record low interest rates, some of the assumptions for investment returns have to be looked at with a grain of salt. But the main purpose of the seemingly high rates of return is to make the comparisons and examples easy to grasp.

When you examine the rates of loans, foremost the credit card financing rates, you will notice that those rates are always a lot higher than savings rates for example. That difference is even more evident when the general interest rates are as low as they are now. At present, you might get only as much as 1% interest on your savings whereas credit cards usually have financing rates of 20% or more. Quite a difference...

This leads us to an important concept in the world of finance. Without exception, the financial institutions that hold "YOUR MONEY", i.e. your bank, credit card provider or broker, create terms that work in their favor rather than in yours. Therefore, the interest you receive on your savings will never be anywhere as high as the rates charged for a loan. The difference between receiving and paying interest from the bank's point of view is easy profit. Sadly, that is not is something the banks are willing to give up for your sake.

It is therefore immensely important that you always read and understand the terms and conditions your bank is offering for their services. You too do not want to give up part of your money so that banks can make even bigger profits.

Einstein’s Advice

2010-09-01T16:47:00.000-07:00

Most of you may have learned simple interest and compound interest at some point in school and you probably still have a rough understanding of simple interest. Compound interest however, is a bit “iffy”. What was that formula again? Could you pull that off if someone asked you on the street? Probably not...but you don’t really have to as long as you have a rough estimate of how compounding interest can affect your money.
You can use the Rule of 72 to quickly estimate how many years it takes to double your money at a given interest rate. Albert Einstein, one of the most famous scientists of modern times, loved the Rule of 72 and referring to compound interest, is quoted as saying:
"Compound interest is the greatest mathematical discovery of all time"
If you can remember E = mc² you should be able to remember this:

72 ÷ interest rate = # of years to double your money
Example: 72 ÷ 10 (%) = 7.2 (years)
$1,000 invested at 10% would take 7.2 years to grow to $2,000

Remember, this formula is an approximation not 100% accurate, but pretty close. If you’d like to calculate numbers to the nearest cent, here’s the actual compound interest formula:

P_n = P₀ (1+r)ⁿ
Where,
P_n = Future Value
P₀ = Present Value or Principal
r = interest rate (per year)
n = time (in years) a.k.a. compounding periods

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens.kownatzki@fxistrategies.com
As always, please help us spread the word and promote financial literacy!

Learning the Rule of 72

2010-08-24T11:42:00.000-07:00

Most if not all guitar players and many musicians playing other instruments have at some point learned about the Minor Pentatonic Scale or its bigger cousin, the Blues Scale. It is one of those essential tools that you can rely on when everything else fails and you need to figure out how to play at least a somewhat acceptable solo.

In Finance, the Rule of 72 is equally powerful and it too can be used when everything else fails.
This is our first post on learning the rule of 72, considered by many finance gurus as one of the most essential rules of personal finance that you can apply in your daily lives.
The rule of 72 is widely known as a quick way to compute the doubling time of an investment.

Here’s how it works:
Take the number 72 divide it by the interest rate to find out the number of years it takes to double your initial investment at that given rate. The formula looks like this:

72 ÷ i (interest rate) = y (years)
For example, the rule of 72 states that $100 invested at 10% would take 7.2 years to double.

72 ÷ 10 (%) = 7.2 (years)
The rule of 72 also works in another way. If you want to know how much of a return you need to double your investment in say 10 years, the calculation works like this:

72 ÷ 10 (years) = 7.2 (%)
We will have many opportunities to use this rule using all kinds of examples. For now, just remember:

72 ÷ interest rate gives you the years you need to double your money.

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens.kownatzki@fxistrategies.com
Please help us spread the word and promote financial literacy!

Think Twice Before Buying On Credit

2010-06-17T11:40:00.001-07:00

In our previous post we talked about giving in to the temptation of buying a gadget just because it is on sale. I suggested a self-test everyone should make before considering a purchase of anything that's on sale:

Ask yourself this: Would you still buy the gadget if it wasn’t on sale? If the answer is yes, then you might have a legitimate reason that the item is what you really need. If the answer is no, go back home and forget about the impulsive shopping moment.

Today, I want you to consider the story of George.

George was at his favorite music store, having dragged along his buddy Mike just to check things out. Both snooped around the store and saw that there was this keyboard on sale at 20% off the suggested retail price. The original price was $1000, so George assumed 20% off would save him $200. Now that the sale was on, George remembered he always wanted a keyboard, even though he’s really a guitar player...

George did not have anything close to $1000 or even $800 in cash but he had a credit card and figured he could always just pay off say $40 each month by working an extra hour each week at his part-time job. At $200 off, that keyboard looked and sounded really really tempting. Should he go ahead and buy it on credit now while it's still on sale?

George, still a student at a music college, did not have a steady job so his income fluctuated quite a bit. Since he hadn't been too good at paying his monthly bills on time, his credit score wasn't the best either. As a result, the credit card company charged him a very high interest of 29% on his outstanding balance.

With that in mind, Mike pulled George aside and rattled his head around a few times saying: "Wake up George", he said. "Do you realize how long it will take you to pay off the credit card balance?" Mike, who loved math, pulled out his iPod remembering he just recently downloaded a finance app. He punched in the following numbers:

Hit the enter button and nearly chocked when he saw this:

That keyboard “on sale” almost turned out to be an expensive and painful lesson if Mike hadn't checked things on his finance app. Not only would it take him more than 2 years to pay off the keyboard, it would end up costing George $1,106.16 ($800+$306.16 interest) – not much of a sale after all...

Lesson learned
A 20% discount can easily turn into a huge surcharge if you buy things on credit. Always think twice and do your math before you buy anything on credit!

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens.kownatzki@fxistrategies.com

The Lure Of “On Sale” Items

2010-06-16T17:26:00.001-07:00

We have all been there - Browsing through your favorite store and you see that big red tag:

Sometimes you see a huge sign right in front of the store inviting you to come in and “save”

Who wouldn’t want to save money and get some new music gear at the same time?

As luck would have it, that new gizmo you previously looked at with a bit of disdain looks a whole lot better now with the “20% Off Sticker” attached to it. Isn’t it strange how a “soso”, “just ok”, “maybe yes” piece of gear now becomes more like a must have item? And the only difference being the advertized sale price?

Well, let’s dispel some myths here...

First off, the word “savings” is a complete misnomer in the context of advertising. The only way for you to “save money” is to not spend it. Put your money in a piggy bank or open a savings account – that is saving. When you go shopping, you may pay a lower price on a sale item, but you are definitely not saving.

Second, prices always change buying behavior, there’s simply no way around it. But instead of letting your impulses give in, ask yourself this: Would you still buy the gadget if it wasn’t on sale? If the answer is yes, then you might have a legitimate reason that the item is what you really need.

If the answer is no, go back home and practice your favorite solos, arpeggios or chord progression. That will definitely save you some money.

How To Get $1 Million

2010-05-13T11:01:00.000-07:00

The task seems daunting, almost unreachable for many of us. "If you could only have a Million Dollars what would you spend it on?" that is the sort of mind games most of us have been playing at some point in our lives. How realistic is the goal of becoming a millionaire?

Whether you work as a musician, painter, banker or accountant, the goal is indeed reachable. If you start saving and investing early and you plan wisely, it does not appear such an unrealistic goal after all.

Let's use an example to show you that the illusive $1 Million target is not all that unattainable:

If you can save about $10,000 this year and then invest another $10,000 each year at a compounded interest of 7%, you could reach that goal in about 30 years.

If you can save about $20,000 this year and then invest another $20,000 each year at a compounded interest of 7%, you could reach that Million Dollar goal in only 20 years.

Sounds unreal? Not at all – it’s all about planning. There are numerous online calculators that can help you do these types of long-term financial goal settings. Send me an email to clemens.kownatzki@fxistrategies.com to get your own personal savings goal calculator.

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens.kownatzki@fxistrategies.com

Please help us spread the word and promote financial literacy!

Good Money Habits That Work: Living Below Your Means

2010-04-30T08:33:00.000-07:00

As any seasoned entrepreneur can tell you: There is no single formula or recipe to become rich. Most successful musicians will tell you the same story: It takes a lot of hard work to arrive at a point where you are financially on a sound footing. There is however one way to increase your financial net worth over time by simply living below your means. Spend less than you earn and you will increase your wealth over time.

To meet some role models for the notion of living well within your means, please consider this insightful article: Five Billionaires Who Live Below Their Means.

Topping the list is Warren Buffett, one of the wealthiest self-made billionaires and also one of the most successful investors of our time. Mr. Buffett is the most un-assuming, low profile person you could ever meet. As legend goes, he still lives in the same house he bought decades ago for only $31,500. How is that for an example of dealing with real-estate bubbles.

Mr. Buffet may be the epitome of the "living below your means" school of thought and he may have taken things to an extreme. But the lesson is clear: Spending less than you earn could be the single most important habit ensuring a sound financial future.

New Credit Card Rules & The Time Value Of Money

2010-04-28T10:25:00.000-07:00

Every now and then, governments implement useful new regulations. It was the case when Tobacco companies were required to put health risk warnings on all their products and advertisements and here is another one which has been long overdue IMHO. The Federal Reserve's new rules for credit card companies mean greater protections for consumers. On their Website, the Federal Reserve lists some key changes you should expect from your credit card company beginning on February 22, 2010.

There are various new rules which all make sense in terms of limiting the shark-like behavior of some of the more notorious credit card companies. Perhaps the most relevant changes that could affect you positively are the new rules for late payments and minimum payments.

Have you looked at your credit card statement recently? The first page should now look something like this:

The prominent displays of late payment and minimum payment warnings should provide some deterrent for all of us credit hungry musicians.

As an exercise, hopefully creating some form of an “aha” effect, use the 2 examples above to truly understand the difference of paying something today versus delaying payment. This is a perfect illustration of the time value of money, a concept we will be spending a lot of time with in the future. Meanwhile, take out your calculators and run through some calculations.

You can also see a great cartoon on the subject at our previous post Funny Money.

As we concluded then, it’s always best to pay off your credit card balance in full!

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens.kownatzki@fxistrategies.com

Please help us spread the word and promote financial literacy!

Funny Money, the fun site to learn about money

2010-04-27T09:52:00.000-07:00

This is an excellent concept I just came across: Funny Money is a website based in Canada using cartoons and interactive tools to teach kids and about basic concepts of money. As they put it: North America's #1 fun-ancial seminar.

Please check out this excellent cartoon: Get it on Credit

The cartoon teaches you some basics about credit cards. While being entertained they also learning about credit cards, payment terms, compound interest and credit scores.

Enjoy the cartoon and remember to pay off your credit card balance in full!

Click here to watch the video

Why Teach Basic Finance Skills To Musicians?

2010-04-10T08:53:00.000-07:00

A recent national survey by the Financial Industry Regulatory Authority (FINRA), the largest independent regulator for US securities firms, reveals a disturbing lack of competence when it comes to basic financial literacy among US individuals.

The study also suggests, among many other alarming trends, that younger individuals display a much lower financial literacy than older individuals.

Source: Financial Capability in the United States. FINRA Investor Education Foundation, December 2009

Many musicians, particularly the younger and upcoming talents, are somewhat clueless when it comes to handling their own personal finances. This needs to change - now more so than ever that tougher economic times are looming upon us all.

Financial literacy is not an art form nor is it an innate ability or talent. Most of the concepts of understanding finance are based on simple math skills (Middle School level) and a bit of common sense, all of which can be taught at any age. These fundamental skills need to be taught and practiced just as a musician would need to practice many years before embarking on a career in music.

A musician needs to build up the motor skills as well as the musical understanding and likewise do students need to learn, understand, and practice basic financial skills to better manage their personal finances. Here's a simple rule: It's not how much you make but how much you keep that defines your financial future!

Most importantly, by teaching musicians (and artists in general) to understand their own personal financial situation and enabling them to live within their financial means, we can elevate a much larger group of musicians to the ranks of “working musicians” and “working artist”. All those musicians who would otherwise be forced to wait tables or work odd jobs could devote much more time towards developing their craft. Music and art in general might experience a whole new renaissance.

Please help us spread the word and promote financial literacy!

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens.kownatzki@fxistrategies.com

"Money 101" For Musicians - A New Site Is Born

2010-03-31T08:11:00.000-07:00

Hi Everyone!

This site is devoted to promoting financial literacy among musicians, artists and supporters of the arts in general. It also serves as a sounding board for programs, projects, tools, resources. We welcome an open discussion and are looking for contributors to share insights and information.

The only way for the arts to survive and prosper in these critical economic times is to create financially literate and self-supporting musicians and artists.

Please help us spread the word and promote financial literacy.

For questions, comments and suggestions, please feel free to use the commentary section or email: clemens.kownatzki@fxistrategies.com