What Pop Music Can Teach Us About Personal Finance

(Dominic Sayers)

With so many personal finance books and columns spouting the same tired clichés, perhaps it’s time for a fresh perspective. Just for today, put down the Wall Street Journal and pop in your favorite Beatles album. While it might seem silly to extract personal finance lessons from pop music, it turns out that the genre has much to teach us. Some of the timeless axioms of pop run parallel to intelligent money management and help illuminate the advice that so many of us know, but so few of us follow.

The First Deal Isn’t Always The Best Deal

Young, unproven musical acts often rush to sign a record deal as soon as possible. Uncertain of their futures and anxious to silence their critics, musicians frequently prioritize “getting signed” over the specifics of the deals they are offered. Predictably, this tends to result in meager royalties, demanding tour schedules and a sinking feeling that the record label bent you over a barrel.

An all too similar scenario confronts most consumers early in their adult lives. Once you turn sixteen, you will begin to be bombarded with pre-approved credit card offers in the mail. Like a shrewd record executive, each offer touts itself as being the best deal you could hope to find – and pressures you to accept immediately. And like overzealous musicians, consumers often sign on the dotted line for the first offer they receive.

Sadly, the outcome tends to be the credit-card equivalent of a bad record deal: high interest rates, lots of fees and shoddy customer service. But unlike a record deal, you can sever ties with an poorly chosen credit card right away. Pay off the outstanding balance (if any), tuck the card away and select a new one using more stringent criteria. Ideally, you want a card with no annual fees, rewards you will use, the lowest possible interest rate and reasonable, clearly stated fees.

Life On The Road Isn’t All It’s Cracked Up to Be

(FaceMePLS)

The undying dream of a young act paying its dues in garages or dive bars is to get out on the road. It sure seems glamorous from afar: a new city every night, fresh faces and adoring fans. Countless movies, such as Almost Famous, depict the crazy thrill-ride of an up and coming group getting its first taste of the open road. But in real life (and in the movie), life on the road eventually leads to problems of its own. Living out of suitcases and eating a a steady diet of fast food gets old after the first few exciting months.

The same applies to runaway debt spending. Sure, the day you take home your new entertainment center or Armani suit is a blast. But if all you did was mindlessly charge it all to a credit card, your own “road blues” will soon kick in. Eventually, it dawns on you that you will need to repay these impulse purchases over the course of many months or years. Worst of all, by the time you’re halfway through the payments, the items you purchased will have lost a lot of their luster. Unfortunately, like a pop group that must wearily perform its last five shows, you will need to keep paying whether you want to or not.

Get a Good Manager (or Become Your Own)

(mawel)

Recording contracts, album royalties and cuts of ticket sales are thorny, contentious issues that lie beyond the expertise of most musicians. Rather than attempting to master these key subjects, most groups “outsource” their handling to astute managers. It’s a classic example of the division of labor: the group makes the hits, and the manager makes the business decisions. Given the chance, a manager can make or break a group’s entire career. In a recent interview, ex-Van Halen bass player Michael Anthony revealed that despite several multi-platinum albums, the band did not make any “real money” until Sammy Hagar took over vocals – and brought in his manager.

The personal finance equivalent to a band manager is a financial planner. If you are not financially savvy (and don’t care to be), a financial planner can lay out a coherent plan that encompasses savings, spending, investing and retirement. Of course, not every band or consumer needs a “manager.” The alternative is to educate yourself on the mechanics of personal finance and make choices in line with what you learn.

Personal Finance Sound Bites

If that’s not convincing enough, let’s look at some specific lyrics. To be sure, they weren’t written with money management in mind. But listen carefully, and you’ll take away messages that you can apply to your finances:

• “Showin’ how funky and strong is your fight, it doesn’t matter who’s wrong or right!”

This line from Michael Jackson’s Beat It could easily be applied to the situation of someone struggling to repay credit card debt. Far too many people get caught up in blame the credit card companies for their woes. But it really doesn’t matter who’s wrong or right. The fact is that you owe a debt and life will not get much easier until it is repaid.

• “I went down, down, down and the flames went higher. And it burns, burns, burns the ring of fire.”

Without intending to, Johnny Cash described the downward spiral of financial ruin in his hit Ring of Fire. Whether it’s credit card debt, unpaid bills or minuscule savings, those in dire financial straits have difficulty taking the painful but needed steps that lead to true recovery.

• “We’ll get higher and higher, straight up we’ll fly!”

With an open mind, Van Halen’s pop hit Dreams can easily be interpreted as a call to set ambitious financial goals. Saving and budgeting will feel less like chores if they are aimed at a passionately sought purpose, like your dream home or starting a business.

• “Everyone’s got to face down the demons, maybe today we can put the past away.”

What Third Eye Blind really wanted to get across was that no financial situation is so bad that it cannot be overcome.

• “I will not make the same mistakes that you did, I will not let myself cause my heart so much misery.”

Could Kelly Clarkson have been talking about learning from other people’s financial mistakes? Probably not – but you should. Strive to emulate other people’s successful financial behaviors (and avoid their mistakes) whenever possible.