Lessons From My Elders
I won't always be young.
I'm not jaded by the notion that I have a lot of years ahead of me, and many lessons to learn. But eventually, I won't be able to work the same 40 hours per week (plus the occasional side gig) to support my family and cover my health expenses. Not forever.
So when someone older than me talks about life, I'm happy to listen because I might be in their shoes someday.
I'm also a sucker for a good story...
Retirement #3: The distant artist
Some people like to work hard and play hard, like my cousin JJ on the other coast.
With a passion for cinema and photography, JJ left for California as soon as she had enough money for an apartment. She loves her work, both in study and creation, and it consumes her – she'd be the first to admit it – but JJ also loves to schmooze. She's a pro at working the room at a party, fulfilled by the small moment-to-moment connections she makes with other artists.
You may be wondering, how can a lifetime in art pay off?
Here's what I learned from my cousin, the distant artist:
1. Residual income is a return on investment.
Think of someone who owns a successful business. They work hard early in life, investing in a company that should pay off later in life, right? That's the ideal: the company earns a healthy profit, managers handle the daily grind, and the company runs itself.
For many artists, it's a similar game.
In one industry, musicians pitch albums that make some profit and their hit songs get sold to radio stations, movie soundtracks, or grocery stores. Those copyrights make money again and again and again (hopefully).
In another industry, actors and crews work hard each gig until booking a hit TV series, then drive that series for six quality seasons, make sure it gets picked up for reruns, and land it on a good streaming service (hopefully).
Even after the first seasons are done filming, if they're still being aired or streamed, then those episodes are still earning profit – and the artists are making residual income as they work on the rest of the series.
That's JJ's industry. She's worked enough gigs to receive residual checks from multiple studios each month without lifting a finger.
So, what's the lesson? Look into gigs, sales, and opportunities that could pay off later in life. Even if it's a side hustle to supplement your primary career. Perhaps there's something you can do today that could earn more profit tomorrow, and make the next chapter in life a little easier.
2. Allocate funds to prepare for life's turns.
The amount of income JJ gets from those residuals – it's almost a retirement plan. However, according to JJ, it's not sustainable enough. The checks arrive without warning and have completely unpredictable totals. Also, most projects sell well for the first few years, then dry up.
That's where investments come in.
JJ treats those checks like payroll, and she pays herself first. A chunk of every check goes to her savings goals and becomes an investment. While she's never had access to a proper 401k plan, she has always prepared for retirement by investing in IRAs (Individual Retirement Accounts).
For your own peace of mind, I encourage you to understand the difference between Traditional and Roth IRAs.
I won't get into the nitty gritty, but JJ splits her investments between these two types of IRAs. This way, some of her investments are more liquid, in a Roth account, in case she needs money before she retires. The other investments, in the Traditional account, are saved to supplement her "Social Security years."
And it's already paid off.
In 2011, JJ's house flooded. Unfortunately, insurance payouts and FEMA relief funds took ages to arrive, and JJ had exhausted her emergency savings. Fortunately, JJ was prepared for the unexpected. She tapped into her Roth IRA to help her through that difficult season. Now, she gives endless credit to her financial planner for guiding her through the process.
How you can put this idea into action:
The easiest way to commit to any savings plan is to auto-allocate, and that goes for your IRAs, too. If you have paychecks that automatically deposit to your account – "direct deposit" – you can automate the rest of the process so a set amount or percentage goes into your savings or investment accounts.
Maybe you and your advisor decide you can invest 12% of your income. You could split your direct deposit, so that 8% goes into your Traditional IRA, 4% goes into the Roth, and the rest goes into your checking and your health savings account. Bada bing, bada boom! Watch your investments build up without lifting another finger.
It's important to note, everyone's finances are unique and neither JJ nor I are licensed investment professionals. Make sure you seek advice from someone who's qualified.
3. Your financial priorities – and your budget – should reflect your goals and values.
Like people and snowflakes, no two budgets are identical.
When I got married, my cousin JJ wasn't at the wedding. It's fine – we had nearly 100 family members there, and it was a bash! But JJ, blaming the opportunity cost of spending a week in NY and the real cost of plane tickets – she watched the ceremony via Zoom and chatted with guests remotely.
It's not the first family event she's skipped and won't be the last.
Here's the part that got me thinking. The same year as my wedding, JJ purchased several paintings worth over $20,000 and took a long cross country road trip on her way to work a gig on the East Coast.
My point is, we know it's nothing personal. She always professed her appreciation of Hollywood culture and her love of art – it's part of who she is, and we wouldn't change a thing!
It's also how she plans her budget.
Having a passion for art, she makes room in her budget for those kinds of expenses. And knowing she has expensive taste in art, she makes a lot of room.
When it comes to your own budget, you can't skimp on bill payments and necessary expenses. Those are fixed. But the other part of your budget – the flexible expenses and wants, like entertainment and travel – those are the things you can adjust.
Our financial decisions, from small savings to big investments, travel to housing, and everything in between – they're as unique and creative as the people we meet. So, it's important to decide for yourself: What is your financial plan? What do you value? And what are you willing to sacrifice, to budget for what you want?
Whether it’s a note of caution or a prime example of investment savvy, we can all learn a thing or two from those who are further along life’s journey. Keep that in mind as the people in your life share their own stories.
Meanwhile, our blog has plenty to explore!
-JMS
