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Let a Playlist Help You Make Good Money Moves

Feb. 7, 2020
Investing
musical-advice-that-can-help-you-manage-finances
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Next time you’re looking for financial advice, ignore your opinionated uncle and turn on Spotify.

Over the decades, many pop stars, and rock, country and rap artists have offered catchy advice that can remind you to stick to your personal finance goals. Below, we rank some of the best:

1. ‘Diversify your bonds’ —Wu-Tang Clan

Made famous by the “Wu-Tang Financial” sketch on “Chappelle’s Show,” this line gives some sage advice: Diversification is one of the most important aspects of investing.

If you invest all your money into a single stock or bond and that investment loses its value, you’ll be out some serious cash. When you diversify, you spread your money across not just different types of investments — like stocks and bonds — but also across investments from various industries and geographic locations. Diversifying is one of the best ways to safeguard your investment portfolio against risk.

If you’re not sure how to diversify your assets or would like some help, think about using a robo-advisor. Robo-advisors are automated investing services that help you choose investments and manage your portfolio. They’re cheaper than human financial advisors, and you don’t have to worry about managing your investments yourself.

2. ‘Floss a lil’, invest up in a mutual fund’ —Busta Rhymes

One way to diversify your portfolio is through mutual funds. Unlike stocks, which are investments in a single company, mutual funds are portfolios of investments — one mutual fund might hold hundreds of different stocks or bonds. Mutual funds can help investors quickly and easily diversify their portfolio and avoid having to pick individual stocks themselves.

You will pay an annual fee to invest in a mutual fund, but there are ways to cut costs. One is choosing an inexpensive type of mutual fund called an index fund, which invests in an entire stock market index — for example, the S&P 500.

3. ‘If they can’t raise my interest then I have to let them be’ —Madonna

Preach, Madonna. If your precious cash is sitting in a traditional brick-and-mortar savings account, it’s time to change it up: Think about opening a high-yield savings account. Many offer rates even a Material Girl would approve of: Currently, 1.60% or more, which is significantly higher than the national average savings account rate of 0.09%. Cash management accounts, which are offered by investment firms like online brokers and robo-advisors, are similar to savings accounts and also offer high interest rates.

4. ‘Grab that cash with both hands and make a stash’ —Pink Floyd

This may be obvious (and easier to do when you’re ultra-famous), but Pink Floyd has a point. Making money and putting it away is the basis of any saving or investment advice. From cutting your cable bill to making a budget to refinancing a loan, there are lots of ways to “grab that cash,” even when things feel tight.

Then you have to put that cash away. If you keep the money you save in your checking account, it may not stay saved for long. Having a dedicated savings or investment account can help you safeguard your money and keep yourself from spending it. Some employers even let you split your direct deposit between different accounts. If you can, arrange to have a portion of each paycheck go directly to savings.

5. ‘Lousy pay, there ain’t no 401(k), I know this may come as a shock, but this here’s a full-time job’ —Gretchen Wilson

Gretchen Wilson’s country ode to the trials of being a mother points out the obvious about unpaid work (often) performed by women: There’s no paycheck, and there are no benefits. Stay-at-home parents should treat the work they do like any other full-time job and think about saving for retirement. There may be no 401(k), but you can open a spousal IRA.

An IRA is a retirement account you open on your own. Because of the tax advantages, IRAs typically require contributors to have earned income; however, spousal IRAs allow you to contribute based on your spouse’s income, as long as you file taxes jointly and your spouse makes enough to cover your contribution. (Here’s more about spousal IRAs and how they work.) Single parents can contribute to IRAs as well, as long as they have earned income.

6. ‘Whoever said money can’t solve your problems must not have had enough money to solve ’em’ —Ariana Grande

Grande’s theory is partly true: Buying stuff you don’t need may not make you any happier, but having enough money for your needs (and at least some of your wants) alleviates stress and can help you achieve a better quality of life.

The key is to recognize what “enough” means to you so you’re not constantly striving for more. For most people, “enough” doesn’t mean a bigger house or a fancy car. It means having an emergency fund to fall back on, or not having to stress about retirement. That kind of financial security is a surefire way to buy yourself some happiness.

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