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 If
you’re like most DJ owners, you’ve invested a lot of capital
in your company. If you want to ensure the continued growth
of your operation and your income, chances are you’ll need
to keep doing so. Or do you? Some DJs are faced with the
question of whether to plow profits back into their DJ business
or to establish a financial nest egg so they can collect
investment income well into old age.
We’d
all love a second income. A second source of income – be
it interest income generated by a nest egg or other investment
income – is that coveted "safety net" that creates
almost phantom-like income while you operate your DJ business.
But finding out how to invest your money, unfortunately,
is as much an art as it is a science. What follows are some
rules of thumb to help you make the right decisions.
First
off, you should be examining your DJ business as an investment
vehicle. Doing this will not only help you fine-tune your
operation, but it will also help you decide where your savings
and profits will produce the best return. But most importantly,
when you examine your business as an investment vehicle,
you’re taking your first dip in the river of financial planning.
But
how do you do this? The steps
below should help you put things in perspective.
Add
up your worth. Like spring cleaning, you should take
an annual inventory of your wealth. There’s no better way
of determining where you’re at in your business’ life cycle.
But what assets should you include? Look at your insurance
policies, look at your house, look at your bank account
and look at your investments. How much money does the guy
down the street owe you? What’s your car worth? This is
your starting point.
Set
your goals. If you’ve inventoried your life and find
that you’ll be worth $100,000 at retirement, will that $100,000
produce enough income to live the life that you want upon
retirement? What amount of income will you require to keep
your current lifestyle? $60,000? $100,000? Because it’s
impossible to know what a loaf of bread will cost at the
time of your retirement, keep it simple by thinking in terms
of today’s dollar value.
Determine
how to reach these goals. Figuring out what must be
done in order to achieve your goals is the heart of the
financial plan. First, this may mean you’ll need to work
harder now so you can save more for retirement. But more
importantly, this step entails planning an investment strategy
that will generate additional income for you.
But
where should you turn? Investing in bonds used to be fairly
steady. In the last two to three years, however, bond rates
have fluctuated just as much as the stock market. It used
to be you could invest in blue chip stocks that would guarantee
a dividend every year, but now they too are becoming as
volatile as high-tech stocks.
Or
you can go into a mutual fund, but again, it’s going to
be anyone’s guess what they’ll be like tomorrow – that’s
why you should hire an investment advisor who maneuvers
your portfolio and keeps track of what’s going on.
Typically,
most people who are planning their financial future will
sit down with an insurance agent, a banker, lawyer or their
accountant. But beware – everyone is going to try and peddle
what they’re selling. If you sit down with a stockbroker,
they’ll try to sell you stocks; most insurance companies
offer free financial planning, which usually entails buying
a lot of insurance. That’s why it’s important to get a balanced
group of professionals to sit down and talk to you.
Implement,
implement, implement. You’ve completed steps one through
three, now it’s time to put your, err, money where your
mouth is. If you’re uneasy about implementing your financial
plan, a legion of professional advisors stand ready to help
you. You can seek help on a particular part of your plan
or merely a particular question. Or, perhaps, a general
review of the plan may be warranted. Some financial planning
professionals – including some highly qualified and competent
planners – may be skeptical or even hostile to a financial
plan prepared by anyone other than themselves. If this is
the case with a particular planner, you should be able to
find it out during your initial meeting (which the planner
will often offer free of charge).
A
diversified investment portfolio embodies that old saw that
warns us against putting all of our eggs in one basket.
By having several kinds of investments, such as stocks,
bonds (both general and corporate), real estate and, perhaps,
precious metals, you can greatly reduce the chance that
a particular economic or legal change will devastate your
investment fund.
Maintain
your plan. Even the best financial plan can sour with
age. Just look at today’s stock market prices. If your nest
egg were invested in high tech stocks, you’d have to change
your strategy fast to achieve desired goals. You need to
keep your plan up-to-date by making sure that your investments
perform as expected as well as by adjusting your financial
plan for changed circumstances. Look at your plan from time
to time to check that your investments are on course. Remember,
you should allow yourself a plan that you can switch out
of when things change – always based on your current position,
your retirement goals and the economy.
Invest
in Your Business Instead
OK,
so you’d rather invest in your DJ business, not a nest egg
that will produce another income. It shouldn’t surprise
many DJs that small businesses are a growing industry. According
to U.S. Government statistics, about two-thirds of the country’s
economic growth in the last decade has occurred as a result
of small businesses. In other words, your successful small
DJ business may be the most profitable investment you can
make!
You
can invest in your business in many ways. For example, properly
structured loans to the business can provide a higher rate
of return than lending or depositing your money in the local
bank.
You
can also factor in tax-saving opportunities. For example,
owning your business building means you can reap depreciation.
In other words, why not stake your ownership in the building
that houses your DJ operation? You can lease it back to
the business, generating rental income and tax deductions.
In fact, any expense tied to the building is considered
a commercial investment, so you can reduce your property
taxes. If you have a rental agent, his fees are deductible,
too.
The
Choice Is Yours
There
it is. The choice, of course, is yours. Either way, a successful
financial plan should present you with a choice between
pouring profits back into the business or into a more diversified
portfolio. In other words, your financial plan should do
for you the same thing that your business does: increase
your personal wealth.
Over
time this financial planning process will enable you to
rely less on earned income (that is, the income you derive
from your DJ business) and more from unearned income. The
investment planning process should not in any way require
you to retire or pull back from your DJ business; however,
an investment planning process done correctly will let you
one day book five systems from the shores of Antigua.
If
you have any questions for Mark Battersby, please send them
to DJ Times c/o TCB, 25 Willowdale Ave., Port Washington,
New York, 11050, fax 516-944-8372 or e-mail djtimes@testa.com.
If
you have any questions for TCB, please write to
DJ
Times c/o TCB,
25 Willowdale Ave.
Port Washington, N.Y., 11050
fax 516-944-8372
e-mail djtimes@testa.com.
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