by Marty Dodson
Oct 1, 2016
I grew up with a father whose financial philosophy was “If it’s in the bank, we should spend it. There will be more there next month.” That resulted in our family often running out of money before all the bills were paid. And it resulted in a lot of stress.
When I first went out on my own, I was looking for a better financial plan than my dad’s and I had heard family rumors about a cousin’s husband who would only buy things that he had the money to pay for. That included things like cars and houses. So, at the next opportunity, I cornered him and started asking him questions. He said that his only philosophy regarding money was “Don’t spend it unless you need to and don’t buy it unless you can pay cash.”
His philosophy led to nice cars being paid for upfront, a beautiful home and very early retirement with a comfortable lifestyle. I liked that plan better than my dad’s.
So, I started following that model except for cars and homes. I couldn’t afford to do that just yet on the meager salary I earned as a youth minister. But, I didn’t buy anything else that I couldn’t pay for. I paid credit cards off each month and I didn’t make any large purchase without paying in full. That strategy served me well.
When I began songwriting, I worked for two years for NO pay and for 5 years at $866 per month. I still managed to avoid using credit for anything other than cars and homes. I drove some pretty junky cars. And I lived in a pretty low-end condo for a good while. But I managed to hang on to my borrowed financial philosophy.
After 6 years of songwriting for very little money, I got that first hit. The first big quarterly royalty check I received was for almost 3 times the highest YEARLY salary I had earned previously. I was holding a check for nearly 6 figures and it freaked me out. I didn’t know what to do with it. Vacation? Big screen TV? Fancy car? Boat? The possibilities were endless.
Then I remembered the advice from my cousin and worked out a strategy that has served me well ever since. The other day I was with a group of young songwriters that were experiencing their first hits. They asked me what to do with their first big check. I’ll share with you what I told them.
I decided that I was going to take this approach with any big checks I got:
1) Pay off debt
2) Treat myself to something small (Using less than 10% of the check)
3) Put the rest in the bank or invest it
I’ve been doing that for 20+ years and it has worked wonderfully. That first big check paid off two cars, and provided a nice Disney trip for my family. The rest went in the bank. When a car broke down, I could pay for the repairs. I could buy a new appliance if one broke. It relieved a lot of financial stress. I put the money in the bank and forgot about it.
After a couple of years, I had a HUGE hit. I followed the same strategy. This time, there wasn’t any debt, so I treated my wife to really nice vacation and put the rest in the bank. That one wound up paying for all three kids to finish college as well as a couple of new cars when others broke down.
I discovered that step #2 kept me motivated. I got a “treat” for each success, but the “treat” left me plenty of money to be financially comfortable for the foreseeable future. There have been long periods between hits at times, but I’ve been fine because I had money stored away.
So, when you get YOUR first big royalty check, make a plan in advance and spend that money wisely. Doing THAT can change your life!
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