Finance 101 for musicians

MUSICIANS and most artists are notoriously uninformed about money management. All they care about is perfecting their own art, never mind financial security. They almost always encounter money issues and concerns which greatly affect their pursuit of financial independence.

Even the legendary composers and musicians relied heavily on art patrons such as kings, dukes and the aristocratic elite to produce their finest works. More often than not, they end up as paupers due to financial mismanagement. And yet, today, we have stars who are rich beyond our imagination.

Once in a while, artists shine and enjoy considerable income and fame. Then comes the challenge of what to do with the money that they made. The most basic next step would be in dealing with banks.

When considering the disadvantages of traditional banking services, it’s important to acknowledge that while banking offers numerous benefits, there are also certain drawbacks that customers may encounter.

Here are the key disadvantages of banking:

– Fees and charges: Many banks impose various fees and charges on customers, including maintenance fees, overdraft (insufficient funds against checks issued) fees, ATM fees and transaction fees. These fees can significantly impact a customer’s account balance if not managed carefully, leading to unexpected expenses and reduced financial flexibility;

– Interest rates: Banks may offer relatively low interest rates on savings accounts and certificates of deposit, and charge higher rates for loans. As a result, the growth of funds in these accounts may be limited, especially in comparison to higher-yield investment options available in the broader financial marketplace;

– Limited accessibility: Traditional banks operate within specific hours, typically during regular business hours, which can create challenges for customers with busy schedules or limited mobility. This limited accessibility may hinder individuals’ ability to access needed banking services in a convenient and timely manner.

– Account minimums: Some banks require customers to maintain minimum balances in their accounts to avoid fees. For individuals with fluctuating income or irregular cash flow, meeting these minimum balance requirements can present a significant challenge and may impose unnecessary financial strain;

– Customer service: Inconsistent or subpar customer service experiences at some banks can lead to frustration and dissatisfaction among customers. Issues such as long wait times, unresponsive support, or lack of personalized assistance can substantially impact on the overall banking experience;

– Security concerns: Banks are susceptible to cybersecurity threats and data breaches, which can compromise customers’ personal and financial information. This vulnerability to security risks raises concerns about the protection of sensitive data and the potential impact of unauthorized access;

– Lack of personalization: Traditional banks may adopt a one-size-fits-all approach to financial services, lacking personalized solutions tailored to individual customer needs. The absence of personalization may limit customers’ ability to access customized financial products and services that align with their unique preferences and circumstances;

– Slow transaction processing: Certain types of transactions, particularly international transfers and large-value transactions, (especially for foreign concerts, etc.) can take an extended period to process through traditional banking channels. These delays in transaction processing may lead to challenges related to funds availability and liquidity management;

– Limited interest in small accounts: Traditional banks may not provide favorable interest rates or benefits for small accounts. As a result, customers with limited funds or smaller account balances may experience minimal growth in their savings and limited financial incentives.

In light of these disadvantages, it is important to be aware that the evolving landscape of financial services has given rise to advancements in financial technology (fintech) and alternative banking options. These innovative solutions aim to address some of the limitations associated with traditional banking, offering customers more convenient, affordable and customer-centric financial services.

Fintech companies and online banking platforms have introduced new avenues for accessing financial services, including digital banking, mobile applications and online account management, among others. These alternative banking options often provide enhanced accessibility, reduced fees, competitive interest rates, improved customer experiences and greater flexibility in managing financial transactions and accounts.

Furthermore, the emergence of neobanks and i-wallets, which operate exclusively online and apply advanced technology to deliver innovative banking solutions, has disrupted the traditional banking model. Neobanks often prioritize customer-centric experiences, competitive interest rates and minimal fees, catering to the evolving preferences and needs of modern consumers. Payment gateways such as GCash and Maya facilitate online payments and other services for online stores.

Overall, the ongoing evolution of fintech and the proliferation of alternative banking options have introduced new possibilities for customers to access financial services that are more aligned with their preferences, needs and lifestyles. As the financial industry continues to evolve, it is essential for the artists to explore and evaluate the full range of banking alternatives available to make informed decisions that best serve their financial interests.

To be continued next Friday, March 22, 2024