Financial harmony

You’re out there every day working hard on writing new material, pitching songs, and striving to generate song placements and royalties. Not only do you face the same sort of financial stresses that everyone else faces—managing your cash flow and expenses, saving for the future, and putting money aside for retirement—but you also face other unique challenges.

There aren’t a lot of guardrails in place for songwriters and recording artists to make sure you’re doing the right things financially for your future, such as taking taxes out of your paycheck or putting aside and matching retirement plan contributions on your behalf. It’s up to you to create those financial safety nets for yourself.

Perhaps the most important step any new songwriter or recording artist can take is to bring together a strong financial support team right from day one of your career. An effective team should consist of:

1. A financial advisor – our Truist Wealth Sports & Entertainment Specialty Group advisors often start working with songwriters and artists before they ever sign their first record deal. The goal is to begin laying a strong financial foundation by establishing separate accounts for personal, business, and tax needs, as well as preparing for dramatic month-to-month income fluctuations with the right credit solutions (e.g., credit cards and lines of credit).
2. A business manager – along with your financial advisor, a reputable business manager will help you navigate the day-to-day activity of managing your expenses, monitoring your account activity, and, most importantly, preparing and reserving income for taxes.
3. An attorney – if you’re looking to sign a publishing deal, you’ll need a knowledgeable attorney to represent your interests—ensuring that your draw and advances are sufficient and that your split of royalties is fair and in line with industry norms.
4. A performing rights organization (PRO) – affiliating with a PRO will be essential in order to collect all of your royalties and licensing fees.

Budgeting and income management

The music industry is now a business where technology and the internet have unlocked the potential for young emerging artists and songwriters to strike out on their own. Trying to do it all yourself, however, can often lead to financial chaos. It’s not uncommon for us to sit down with an emerging songwriter only to discover they have a 500 credit score because they didn’t manage their bills early on.

In the music industry, budgeting, managing, and balancing nontraditional and sometimes volatile income and expenses requires a unique perspective—especially in the early years:

• Be timely in paying your bills, student loans, and credit card accounts. Don’t let a bad score impact your career years down the road when you achieve success and need to front touring costs!
• Be diligent in putting money aside to pay income taxes. Consider setting up a separate account that’s just for your taxes and set aside a fixed percentage of each income check.
• Be overly generous in how much you set aside for the IRS. If you have a surplus at the end of the year, sweep it into a longer-term investment or retirement account.
• Be mindful to pay your quarterly estimated taxes on time.

Publishing rights and royalties

If you’re fortunate enough to sign a publishing deal, it’s important to figure out WHEN you will be paid. Depending on the agreement and the payment terms (quarterly, semi-annually, or annually) of your PRO, you could potentially write a hit song and not see a single payment in royalties for up to a year. When we sit down with you to construct a financial plan, we first focus on your cash flow:

• What do you anticipate your royalties will be?
• Looking out in six-month increments, when will you receive them?
• What does your publishing deal look like?

We always encourage young artists and songwriters to try and own as much of their publishing as they can. It’s difficult, however, when you’re just starting out and don’t really have much leverage. In fact, your first publishing deal may actually provide a more favorable split to the publisher than to you.

The incredible thing about royalties is that, like an annuity, they continue to provide an income stream that can stretch out for years. If you’re a songwriter who builds up a solid catalog over several years, you’ll likely reach a crossroads:

• Should you sell that catalog in exchange for a significant one-time lump sum?
• Or is it better to hold onto your rights to maintain that consistent, stable future cash flow (what we call ‘mailbox money’)?

We understand the perpetual uncertainty that comes with your chosen profession. Am I ever going to write a hit song again? Will I ever get another song published? Alleviating that financial stress and allowing you to channel your focus into the creative side—that’s what a good financial partner should do. We’ve helped songwriters and artists take shorter earnings cycles and develop a plan to be able to live off the royalty income for their entire life. Let us set you up for that same type of success.