David Banner is making serious business moves these days (Interview at end of post if interested). He first arrived on the hip-hop scene as a dirty south rap artist hailing from Mississippi. He came from poverty and knew little about the music industry upon arrival. Battling the common hardships for a music artist and experiencing financial lows during the Hurricane Katrina period, one would assume that David Banner was a typical fly-by-night, washed up rap artist that would get chewed up and spit out by the industry.

Luckily, Banner had an awakening as reported by Billboard:

“Nobody really gave me a hand, played my records or helped me after I had done all the stuff that I did and it was really hard for me,” Banner says.  “Katrina was my recession.”  It was because of that, that Banner began looking towards other means of success. “At one point, I was willing to give it all up,” he says. “God forced me to find other ways of being successful. I said I would never be in that situation again, where music was the only thing, [where] rapping was the only thing that I was doing.”

David’s low created a yearning for entrepreneurship and independence from the music industry. Thus, he began using his creative talents in a new way. He initially began working on a Gatorade music project for the advertising company TBWA\Chiat\Day.  Just like that, he realized that he could “do commercials and score movies for the rest of [his] life.” He found a partner and began his own music house/production company called ABV. In a short amount of time, he’s attracted clientele like Mercedes Benz, ConAgra, Motorola, and more.

The greatest advice shared from his Billboard interview was the following quote: “Stop chasing the light. You are the light. If you stand still and shine bright enough, everything will come to you.”

5 Lessons to Learn from David Banner’s Pivot

1. Be Realistic: If things aren’t working out in your current career or business, it’s time to make some adjustments and set a contingency plan. If David Banner had remained indebted to his label like Young Buck, things likely would have never turned around for him.
2. Educate Yourself: Educating yourself these days is a piece of cake. It goes beyond a degree. Learning is a life-long process that can be done through the internet (e.g.: Khan Academy, Mixergy, CoFounder.tv, TEDTalk, Stanford’s ECorner) ,  seminars, conferences, and reading. Banner himself is an avid reader with a great belief in education.
3. Realize the Power in Ownership: No one can control your destiny like yourself. Instead of capping your own income and creating more wealth for your bosses, consider starting a business of your own.
4. Embrace Hardships: Success certainly doesn’t come in black or white. For many, it’s a long road of various failures and roadblocks before reaching the desired goal. So the next lesson will come in handy.
5. Love What You’re Doing: It will make those hardships easier to overcome if you’re passionate about what you’re doing. There’s always creative ways to fuse together your passions in new creative ways. David Banner’s a musician, and instead of completely giving up on music, he merged it with the advertising world.

We look forward to witnessing and reporting on David Banner’s wealth journey!

If interested, we’ve included a recent 30 min interview David Banner gave on the state of the industry, his business, and other issues in the black community.

*Image courtesy of Black Enterprise.

The biggest flaw of a hardly wealthy person is that they take their earnings at face value. If someone has a salary of $60,000, that doesn’t equate to a person having $60,000 of income. Yet, a hardly wealthy person would think just that. If this was your salary, what would say your monthly spending limit should be?

Breaking it Down

First of all, you can kiss 25% of your income good-bye to federal taxes. This doesn’t include the 8-10% gone to Social Security, Medicaid, State, and Local taxes. Conservatively, this leaves you with $40,200. That’s $3,350 at your disposal on a monthly basis. While it’s ideal that your debt and bills, including rent, only take up a third of your income, we’re well aware that this isn’t the case for many. So, let’s take away half of that. At least 10% should go towards savings, while another 10% should go towards investments (we’re currently a fan of directly buying metals, mainly silver, not stocks). Most Americans have a myriad of monthly personal expenses like hair stylists, barbers, nail technicians, masseuses, gym memberships, etc. that also add up quickly, and sometimes exceed income, causing the credit cards to come out. We haven’t begun talking about staples like food yet.

Let’s break it down according to monthly income:

$3,350
- $1,675 for bills, debt, and housing
- $168 for savings
- $168 for investments
=$1,339

This leaves $1,339 for food, transportation, personal expenses, and whatever needs an individual or family may need. The average hardly wealthy person goes shopping every weekend, spending several hundreds on clothing items, meaning an estimated $800 is gone before food, transportation, and personal expenses are even factored in. Let’s put that in perspective for a hardly wealthy person’s expenses. We call this the “Next Paycheck Syndrome”.

Next Paycheck Syndrome

$3,350

- $1,675 for bills, debt, and housing

- $800 for shopping

=$875

After a few nights of hanging with friends, clubbing, etc., you can take a couple of hundred away, leaving you with $675 left. This doesn’t factor in food, transportation, medication (which many Americans do), beauty expenses, personal indulgences. The hardly wealthy will justify the extra expenses for which their income doesn’t support by saying, “I’ll pay this $250 off with my next $3350 paycheck in two weeks.” However, the reality is that they’re going NET $250 in the hole every month, if they continue the same lifestyle. It leaves their NET worth actually looking like this.

$3,350

- $1,675 for bills, debt, and housing

- $800 for shopping

- $875 for lifestyle, food, transportation, etc.

- $250 for more lifestyle, needless spending

= -250

This yields a $3,000 annual loss.

It doesn’t matter what a hardly wealthy person earns. They generally outspend their income and justify it with their “next paycheck”. This is their thought pattern. What should month expenses look like? Well, we’re unable to tell each individual exactly what their cost profile looks like as each case must be tailored to one’s debt, marital status, household members, dependents, location, tax bracket, health, personal interests, etc. We can only give a general profile, with which we hope everyone is able to reasonably carve out their own “minority fortune” plan.

The Ideal Spending Scenario

$3,350

- $1,675 for bills, debt, and housing

- $168 for savings

- $168 for investments

- $669 for food, transportation, and necessities

- $500 for personal expenses, shopping

=$170

Notice that we intentionally did not spend the entire paycheck, as most hardly wealthy people do. There should always be money left over for emergency funds. If your bills and debt are relatively less than 50% of your income, that’s a good thing! We’d consider doubling down on savings and investment, making it 15-20% of your monthly income. Do not blindly make all of your accessible money personal expenses money.

How Did You Fare?

If you assumed that more than 50%, $30,000, of your salary was at your disposal, you fit in the hardly wealthy category. With that logic, after taxes, you’d barely have $10,000 allocated to bills, debt, food, transportation, etc. We see that as highly unrealistic, unless you’re still living with your parents debt-free. If you fell in this category, you definitely need to sit down and realistically evaluate your expenses. You should only be spending .33% daily of your salary towards personal purchases. If it’s higher than this, it’s time to prioritize. Instead of envisioning yourself with the latest Prada Bag or Louis Vuitton shoes of the season, envision yourself vacationing in the south of France debt free in twenty years.

If you assumed that you had between 30-50%, we’d say you have hardly wealthy inclinations, the higher your estimate was in this range. If you were closer to thirty, this was a very reasonable estimate. However, you probably have an assumption that an entire paycheck is to be spent, even if it isn’t necessarily putting you in debt. Thinking 40% and above should be your wakeup call to evaluate your relationship with money. The advice to the hardly wealthy applies here as well.

The reality is that you should be keeping your personal expenses somewhere between 20-30%. If you chose a percentage in this range, bravo! Most Americans do not think in this way, and you’re above the pack. Keep in mind that your own personal expenses dwindle with each dependent you may have.

Hopefully, after this, you can see why we roll our eyes at every Grade F hardly wealthy millionaire on our blog. They may have earned $6 million, but they certainly don’t have $6 million to spend. Yet, their jewelry and clothing purchases alone surpass 30% of their income before bills, debt, professional services, family, and friends expenses come into play. This on top of that fact that hardly wealthy hardly ever outright purchase their homes upfront. Don’t let this unfortunate behavior happen to you!

Dr. Mark Dean is a true visionary when it comes to computer technology.  PCs dominate in the world of personal computing, but few are aware of the brainchilds behind those technologies. Mark happens to be one of them, owning 3 of the original patents that PCs were built upon. He has been given the prestigious title of being an IBM Fellow, which only 50 employees of IBM have ever received. He was also initiated in the National Inventors Hall of Fame, which only hosts around 150 members. We wanted to take the time to salute this outstanding Grade A model!

Mark has a history full of excellence. He a curious, smart, and driven child growing up. According to Black Inventors, he earned a “Bachelor of Science in Electrical Engineering from the University of Tennessee in 1979”. A year later, IBM invited him to join their company as an engineer. Whilst in this position he furthered his education, earning a Master’s Degree in Electrical Engineering from Florida Atlantic University in 1982. Some of his notable achievements include the following:

In his capacity as an engineer for IBM, he didn’t take long to make a big impact, serving as the chief engineer for the team that developed the IBM PC/AT, the original home/office computer. Along with his colleague Dennis Moeller, he developed the Industry Standard Architecture (ISA) systems bus, a component that allowed multiple peripheral devices such as a modems and printers to be connected to a PC, thus making the PC a practical and affordable component of the home or small business office. Dean would own three of the original nine patents that all PCs are based upon. Dean followed up with PS/2 Models 70 or 80, and the Color Graphics Adapter (which allowed for color display on the PC).

For Mark, these accomplishments were only the beginning. He went on to earn a Ph.D. in Electrical Engineering in 1992. Five years later he was named as “the director of the Austin Research Laboratory and director of Advanced Technology Development for the IBM Enterprise Server Group”.  More accomplishments from Black Investors are quoted below:

In 1999 his team made several significant breakthroughs such as testing of the first gigahertz CMOS microprocessor. After this breakthrough he was named the vice president for Systems Research at IBM’s Watson Research Center in Yorktown Heights, New York, then as a vice president in IBM’s Storage Technology Group, focused on the company’s storage systems strategy and technology roadmap. He was later named vice president for hardware and systems architecture in IBM’s Systems and Technology Group (STG) in Tucson, Arizona and finally the vice president of the IBM Almaden Research Center in San Jose, California.

 3 Things to Learn from Dr. Mark Dean

Mark Dean fits our Grade A title in every way. We’ll list our reasons below:

1. Passion – Mark had a true passion for engineering research. He dedicated his life to his work. He continued to refine his craft. His bio reflects the high level of craftsmanship he strove for with every project he put his heart into.
2. Education – Mark has a true skill. It’s a skill that should never leave him broke and penniless. It’s also a skill that will propel him through the 21^st century’s technology driven society. He has the biggest asset that a wealthy elite can ever have: his brain and skill assets. This is truly what makes a wealthy elite person different from most wealthy or hardly wealthy people.
3. Humility – Throughout Mark’s bio, there is no cessation of achievements. Common in hardly wealthy people, there is no “I have arrived” moment where he stops educating himself, gets complacent, and quits innovating. Mark currently owns 40 patents (some pending), and we’re willing to bet that he has many more on the way.

Curtis Jackson, 50 Cent, is once again attempting to sell his mansion located in Farmington, Connecticut. The 52 room mansion was bought back in 2003 from Mike Tyson for $4.1 million. According to Courant, the asking price began at $18.5 million and has now dropped to an all-time low of $9.9 million.

There are many reasons why 50 Cent is probably trying to get rid of this property. The house is a money guzzler. It’s laced with nightclubs, a gym, guesthouses, a helicopter pad, and more. The house is rumored to cost half a million every year in maintenance costs. The location is considerably far from major cities, which may serve as another deterrent for potential buyers. His real estate agency, William Raveis Real Estate, is labeling this a “prestigious property” in hopes of attracting the highest bidders. Smart move.

It’s a good thing that 50 is realizing that this house serves no significant purpose for him while he still has money. Unlike Mike Tyson, he’s in no need for money, but he realizes that the house is simply a waste of money. Too bad he came to this conclusion during a real estate slump. Flipping the house for a profit might be a tough task.

The house isn’t ideal for anyone earning a handful of millions a year. Unless mega-millionaires or billionaires are looking at the house, the only other interested parties that we can think of are the hardly-wealthy athletes, rappers, and entertainers. Sadly, they’re probably lining up their fleeing dollars to purchase a house that makes no sense. Afterall, who needs 20+ rooms and 20 bathrooms?! Better late than never, 50 Cent, that you realized you did not need such a home. Good luck.

It’s not about how much you make. It’s about how much you hold onto. -Ephren Taylor

We saw this video recently on Mixergy, and couldn’t resist the temptation to post it over here and share with everyone. Ephren Taylor made history by becoming the youngest African American to become CEO of a publicly-held company. He is a major player in the tech world and has been creating highly profitable businesses since around the age of 16. He’s written two books: Creating Success from the Inside Out: Develop the Focus and Strategy to Uncover the Life You Want and The Elite Entrepreneur: How to Master the 7 Phases of Growth & Take Your Business from Pennies to Billions
, which will be released November 2nd. As if it couldn’t get any better, he works hard at being a great role model and gives back to his community. This guy is a Grade A Model and the epitome of minority fortune through and through. Check this lovely interview out. It ties in his background, entrepreneurship, trials, triumphs, insights, and more. It’s the best hour you could ever spend this weekend!

*If unable to see the video, go to Mixergy HERE:

Business Tips via Mixergy, home of the ambitious upstart!

(Continued from:
How Much Musicians Really Make in the Industry Part I)

No Foundation = Eventual Termination

The reason we’re so unimpressed with artists boasting about their imaginary funds and luxurious lifestyle is because unless we see a sustainable foundation behind the funds, we’re certain that these funds will dry up within a finite amount of time. The artists that naively believe they’ll be paid off the industry forever whilst not writing their songs, owning their masters, renegotiating their contracts, and/or starting their own side businesses will be tossed like a five dollar bill once they aren’t moving any units. In such a fickle industry, this is sure to happen to every artist. Then only when the money well runs dry do they stop to think about how little they really knew about handling business and managing money.

The truth is that a record label contract is only a stepping-stone. It can lead you to opportunities, but it will not in itself lead you to wealth. The money is in other branching endeavors such as the following:

• touring (which is why 50 Cent is always touring with G-Unit)
• endorsements
• song writing
• product lines
• real estate
• side businesses

A significant portion of Beyonce’s annual revenue comes from endorsements and song writing credits. Outkast members Andre 3000 and Big Boi continue to earn significant revenue off their highly successful album Speakerbox/ The Love Below due to their writing credits. The money never comes from album sales alone. Even Michael Jackson’s wealth was significantly subsidized with investments like the Beatles and other big artist’s catalogs.

The Reality: Crappy Cash Flow

It’s a sad reality, but the truth is that your average artist is in debt. While they may be diligently chipping off their debt, they’re constantly battling that reality. It’s embedded in their contracts, and there’s no escaping it. No matter how many albums they put out, no matter what label they’re switching to, and no matter what car they’re driving, the fact is that their bank account probably stands at $50,000 or below with maxed out credit cards abound.

Play Smart

Aspiring artists, do not give up on your dreams. A record label contract can be a stepping-stone. However, come up with your own blueprint before you sign any contract. Go over your terms with your own trustworthy lawyer. Think beyond the contract and album sales. Your money must come from other avenues if you’re going to make it. Be smart, and you’ll be legions ahead your peers.

*Image courtesy of Time Inc.

In the music industry, numbers are the name of the game. While your favorite artists may flaunt the fast life vigorously, there’s a 98% chance that they’re even making bank from their record sales. Despite the cars, jewelry, fashion, etc., the likelihood of these same artists being able to afford the lifestyle portrayed in their videos and songs is slim. We’ve all heard the stories of numerous celebrities who rented out homes, cars, jewelry, and furniture in order to keep up the perceived image when “MTV Cribs” came knocking. Meanwhile, the average artist is living in an endless black hole of debt.

The Money Isn’t In Album Sales

The Root has a great article breaking down the distribution of album sales’ revenue. Who gets the smallest piece of the pie? Surprisingly, it’s the artist. They note that “according to the latest Nielsen research, only 2.1 percent of the albums released in 2009 sold even 5,000 copies.” For the ones who are moving units, they only reap anywhere from 12-20% from these record sales.

Keep in mind that the money earned from album sales isn’t necessarily profit. If an artist is signed to a major record label, they undoubtedly have a hefty sum of debt owed to the label. Since the music industry continues to decline in revenue, most labels aren’t willing to shell out major bucks anymore. They put more of the costs on the artist: signing advance, music videos, packaging costs, etc. So, if an artist boasts about how big their signing advance was, they are accountable for paying that back, unless they’re a mega superstar already. In addition to that, the Root details other costly fees the artist must shell out:

As if that weren’t bad enough, even the bands who do move units end up paying through the nose, mouth, eyes and ears for management, legal fees, producers and other expenses, leaving most of them scrounging to pay for record advances and, if they can afford it, health care.

SLRP: The suggested list retail price of a CD is currently $16.98, while the standard wholesale price — what retail stores pay the label per CD — is about $10. Once the retailer gets the CD, they can sell it for however much they’d like — hence “suggested.” Artist’s royalties are a percentage of the retail price. Superstars can get 20 percent of the SLRP, but most get 12 percent to 14 percent.

Packaging charge: 25 percent of the SLRP goes back to the record company immediately for what’s called a “packaging charge” — that’s the label literally charging the artist for the plastic case in which his or her CD is sold.

Free goods: In essence, “free goods” are a roundabout way for labels to discount records so stores will be more inclined to buy them. So rather than sell Best Buy 100,000 records at the regular wholesale price, the label will sell them 100,000 records for the price of 85,000. The artist is then paid for the 85,000 CDs, not the actual 100,000 sold to the retailer.

Reserves: Records, especially records by newer artists, are generally sold with the caveat that retailers can return to the label whatever copies they don’t sell for a full refund. Thus to ensure they don’t lose too much money on artists, record labels will sometimes pay artists for only 65,000 copies out of 100,000 copies, just in case 35,000 (25,000 if you consider the free ones) are returned. If the retailer ends up selling all their copies, the label will then pay the artist the balance owed, which can sometimes take years.

AFTRA and AFM: These are the musicians unions. Singers join AFTRA (the American Federation of Television and Radio Artists), while players join AFM (the American Federation of Musicians). If an artist cuts an album, he has to join a union, which will then take $63.90 in base dues plus 0.743 percent of the artist’s first $100,000.

Record advance: Unlike touring fees, of which the record company can only recoup half, record advances are 100 percent recoupable. That means that if the label fronts an artist $75,000 to pay for whatever he or she needs to record an album–studio time, new instruments, etc. — the artist then owes the label that initial $75,000, regardless of whether the record is a success or not.

Distributor: Music distributors are entities designed to promote and distribute records. The major labels maintain in-house distributors, while most all indie labels use private distribution companies. For smaller bands’ records, the distributor can take as much as a 24 percent cut of the SLRP; bigger bands might only be charged 14.2 percent.

Songwriter/publisher: If an artist doesn’t write his or her own music, someone else has to. And someone who writes a song must first go through a music publisher, whose job it is to place that song with a recording artist who will agree to perform it. If an artist buys the song, the writer and publisher then receive 9.1 cents for every copy of the song sold, a sum they must then split.

Personal manager: This manager guides the career of the artist and gets about 15 percent of the artist’s gross earnings.

Business manager: This manager is the artist’s money man, making sure the musician repays his debts and invests his earnings wisely. A business manager charges 5 percent of an artist’s gross.

Lawyer: While it’s not always the case-many charge hourly-some artist’s lawyers charge 5 percent.

With the hefty costs involved, your average artist boasting about major profits is only referring to ghost money. While their brand may have brought in $1.6 million dollars, they likely only have $150,000-$300,000 of that. This is why you witness artists who completely dominated the scene at one time completely fall out of relevance in the industry (i.e. Ja Rule, Mike Jones, Juvenile, Toni Braxton, all Bad Boy artists minus Diddy, Camron, Dipset crew, etc.). They overspent, did not read their criminally stingy contract, and can no longer recoup their label’s money. So do not be fooled by the industry’s smoke and mirrors.

Stay tuned for Part II: Where is the Money in the Music Industry?

*Images courtesy of The Root and Cracked.

We possibly have another celebrity with hardly-wealthy behavior on board. This time it’s R&B singer Ciara. She recently mentioned in Pride Magazine that she spends an exorbitant amount monthly on shoes to the tune of $11,000. That equates to about $132,000 annually on shoes that

A) decrease in value over time (liabilities)
B) go out of style after a season or two

She was quoted in the magazine saying the following:

“I just love shoes and go for what’s hot. I like everything from Louboutin and Dr Martens to Versace and Fendi…A person should always be able to afford to buy extravagant shoes,” she says. “It depends on the items, but, on an average shopping trip I probably spend a minimum of $1,200. It’s not that bad! On average, I will spend about $11,000 a month [on shoes].”

We can only take a stab at Ciara’s net worth. Celebrity Net Worth reports that it’s about $16 million dollars. However, once we take into account the typical fees deducted for lawyers, accountants, PR people, stylists, mortgages, bills, cars, clothing, etc., we’d be willing to bet that these eat deeply into her net worth.

Priority Check

If shoes are Ciara’s guilty pleasure, then we have no problem with that if…

1) She has been prioritizing her income, putting money towards things that she needs first (basic essentials).
2) She has diligently been investing a portion of her income towards investments and retirement accounts.
3) She has extended her passive income beyond the fickle music and fashion industry, investing in assets that bring her money: real estate, side businesses, stocks, mutual funds, etc.
4) She only uses the remaining money left towards her leisure spending.

If all of these things are in order, then there is no problem. On the other hand, if these credit card purchases are being paid for with credit, taking up a significant portion in her annual income, or thought of as wealth assets, then there is a big problem. Therefore, this post is not to bash Ciara but simply point to issues that we hope have already been considered.

Lesson to Learn

Just because a musician may earn over a million dollars a year (which rarely happens with these iron-clad contracts they naively sign), it doesn’t give them a pass to spend it rampantly because they will need this money to take care of them for life. Furthermore, we should look beyond our own lives and figure out how to make our wealth work for our families and future generations. They are not obligated to impress their friends with their earnings. They do not have to buy fancy cars just to keep up an image. They do not have to limit themselves to designer labels. They should also use their branding to get all the freebies and discounts as much as possible. Celebrities score designer freebies all the time because it counts as a marketing expense for these designer brands. Therefore, we’re hoping Ciara also uses this to her advantage. It’s not being cheap and ridiculous, it’s being savvy with money.

In the end, we know too little about Ciara’s finances to pass judgement. We sincerely hope all is well on the financial front. However, we aren’t pleased with the message insinuated that priorities with her money lie with materialistic things. It could be the fault of the magazine as well. However, let’s pull away from the boasting about our liability purchases and start bragging about our asset purchases. It applies to celebrities and regular individuals as well.

*Images courtesy of Love B Scott.