Alternative journalism spring 2023: The art of money management and why financial plans and affordable housing are critical for creatives in New Orleans

The Problem – Money Sucking

Zip Recruiter reports as of March 2023, the average annual income for an artist in New Orleans is $36,132 a year. This salary dumbs down to about $17.40 an hour, which is a little less than Washington D.C.’s minimum wage. With the cost of living averaging out to $78,800 per year in Washington D.C., New Orleans’s cost of living is almost the same, being that the cost of living is 21% higher than the state average and 12% higher than the national average.

A survey by The Music and Culture Coalition of New Orleans of over 400 musicians in the last three years found that the average pre-pandemic income for musicians in New Orleans is between $24,000 and $28,000 annually. However, the cost of living in the city has risen significantly, with median rent in 2019 being $998 per month ($11,976 annually), according to Census data.

Housing advocates suggest that rent plus utilities should be at most 30% of income, which means that the minimum income for living comfortably in New Orleans is around $40,000, significantly higher than the income of musicians pre and post-pandemic. The survey found that many musicians were paying up to 40-50% of their income towards rent, making them rent-burdened and contributing to housing instability. Overall, the Federal Reserve reports, “The percent of income that this group [rent burdened renters] spends on rent has risen about 10 percentage points since 2000.” Rent Burden is those who spend more than 30 percent of their household income on housing, according to The United States Department of Housing and Urban Development. Additionally, the median take-home pay from gigs was found to be $100 to $125, with a quarter of gigs paying $75 or less, highlighting the challenge of earning a sustainable income from music alone.” The city’s rapid growth contributes to the financial struggles of musicians in New Orleans, and “musicians facing the impacts of a year of financial hardship, loss, stress, and tough choices. Musicians needing to meet immediate needs may feel pressure to take any gig at any pay level, even if it’s lower than pre-pandemic agreements, and knowing how poorly the pay compares to living costs in New Orleans.”

The cultural industries are the second largest job sector in New Orleans after tourism and have experienced significant growth since 2002. The 2016 New Orleans Cultural Economy Snapshot states that New Orleans’ cultural industries provided almost 38,000 jobs, and the number of jobs in this sector increased by 59% between 2005 and 2016. The report identified art galleries (141) and live music venues (136). New Orleans, with restaurants and specialty food stores, art galleries, and live music venues being the most common. The total earnings in the cultural industries have grown by $460 million since 2002; on average, annual earnings have increased by about $6,000. Differently, of the cultural industry segments, entertainment was the only one that did not experience an increase in average earnings from 2002-2015, which are the years highlighted in this report. The earnings growth happened between 2005, when Katrina hit, and 2006, but this growth was true of every segment. Since 2002 the entertainment industry has experienced stagnant income earnings while living costs continue to rise. The 2016 report pointed out that “the lowest annual earnings were in the Visual and Culinary Arts segments, where in 2016 average earnings were $20,259 and $32,620, respectively,” and ultimately shows why workers in these sectors have to split their labor at two different jobs.

Furthermore, this survey reports that of the 280 people surveyed for works in more than one “cultural” segment and of 280 survey participants, they “received 413 total responses to this question, indicating that many respondents work in more than one cultural segment.” In addition, more than one-third of survey participants said they earn other income from non-cultural work. According to The Equity Profile of New Orleans covering 2005-2015 f New Orleans the arts, entertainment, and recreation segment had -26% percent wage growth and a -42.7 percent industry strength index which is not hopeful or good for these industry’s workers. Not only has the government recognized the lack of payment for these artists in the era of the increased cost of living, but there has also been a federal attack on fine artists and art commissions on the public level. Back in 2016, Louisianan lawmakers looked to put a cap on state funding for public art projects.

According to the article published by NOLA.com covering this issue, they stated that the 1 percent of overall funding for any construction or renovation project costing 2 million or more be spent on works of art that only ¼ of that budget in the given year was spent. The point the legislation did bring up was that the state cannot constitution require that only Louisianan or New Orleans artists are commissioned for these projects. However, they should advocate for these, nonetheless. Similarly, in the article “Are Frenchmen Street musicians being fairly paid,” George Wilde states, “People do think they’re allowed to get music for free. It totally devalues what musicians are doing. It’s this notion that, ‘Oh, it’s New Orleans, there’s music everywhere you go. It bubbles up from the street, it’s free and it’s just how we do here.’ … And there is music everywhere. There’s a large supply of music.” Tourists should want to support New Orleans artists without them having to beg or ask. So, the question is, how can we set up New Orleans artists for success in such a system that does not explicitly advocate for them even in their position of importance for the city’s viability?

The Solution – Money Producers

Merrill, a company associated with Bank of America that offers investing, trading, and brokerage advice, recommends about 1 million, 80% to 90% of your annual pre-retirement income, amounting to 12 times an annual income of an artist in New Orleans. Typically, long-term conservative investments require this amount or more in savings of initial investment to see substantial growth by the end of this period, making it a luxury not accessible to everyone. Most New Orleans will need near 30 times their income to save up for retirement using long-term income tactics. 

Rayner Teo, a well-known Youtuber for giving trading advice, says, “the way to approach trading is to regularly add funds into our account, let your edge play out and slowly compound your returns. That’s how you make it big. Remember, trading is a business. You don’t take a hundred dollar business and turn it into 1,000,000 dollar business in two weeks, same for trading.” It’s getting started is what’s scary, but this is how you can start. Start putting 10%-15% of each paycheck aside for investments. Use the formula trading expectancy * trade frequency * bet size to determine your trading strategy, as it can give you an exact numerical answer to what you can expect to gain/lose based on your strategy now that you have money in the market and more income to put in the market. Using the expectancy formula, you can calculate your expected rate of return based on the size of your average wins and losses and your win rate (E= [1+ (W/L)] x P – 1). For example, let’s say your account size is $4,000, around 10% of an average starting salary of $40,000 and less than that of the medium income in New Orleans. You make 200 trades a year, meaning 1-2 investments 3-4 times a week, with an average investment of $20 per trade. Therefore, you can invest, let’s say, $75 a month. You will have a return of 925-dollar profit by the end of the year with a 6% return rate. If you allow that money to remain in your account for two years, you will have a return of around 1,900$ on a 6% return rate.

The SEC’s Electric Data Gathering, Analysis, Retrieval website is where you can research stocks and markets. Use this market research website to research the best markets, like low beta markets, which are utilities, healthcare, and telecommunications, as they are good beginner traders. Suredividend.com discusses the benefits and functions of low-beta stocks with a beta value of less than 1.0. this means the stock moves in the same direction as the benchmark but with a small (less than 1.0) relative change. In addition, this website reports “a long-term study wherein the stocks with the lowest 30% of Beta scores in the U.S. were pitted against stocks with the highest 30% of Beta scores suggested that low Beta stocks outperform by several percentage points annually,” suggesting that lower risk sectors that cause greater outcomes. Low-beta stocks and sectors are, therefore, perfect for new investors. Updated in February of 2023, here is the list of the 100 lowest beta stocks in the S&P 500 provided by the same website.

Jesse Livermore, who started investing at 14, is a renowned example of an investor who has made his own wealth, amounting to a net worth of 1.5 billion dollars of today’s money. Though Livermore was known for purchasing 1000 shares of a stock at a time because markets were traded more thinly, we now know not to spread ourselves too thin too quickly and focus on a few investments at a time typically. Secondly, he didn’t follow his own trading strategy and acted too aggressively, losing all his money. Jesse Livermore had made 100 million dollars in 1929, but lost it all, or about 90% of his earrings when he did not follow his own rules and investment strategy. Livermore believed that good trades would start showing profit off the bat and never fought against the market’s trends. He uses price patterns and volume analysis to make informed decisions about his actions with the stock.

His prediction and success would follow if the following occurred: a few days after the break, the prices would move in the same direction as the break. Then the price would alter against the trend but have a lower volume than before. He would wait until the volume increase would occur again, checking to see if the stock passed back through the determined pivotal point. Then Livermore would watch a stock and enter it on its high point, and when the stock bounced back down to its baseline, he would enter slightly above. However, if the price went slightly below its baseline, he would enter at a price slightly below the new low point compared to the pivotal point. The pivotal point is the high point at which it is “capable” of bouncing up. Essentially, Livermore would enter new highs or lows to reduce risk and create an informed buffer. A buffer is when an investor buys and stores stocks at times good times to prevent prices from falling below a target range (or price level) and releases stocks during bad times to prevent prices from rising above a target range (or price level).” In other words, Jesse would enter a stock at 48 if it falls below the $50 target range and at 50 or $52 if it rises above that target range. There is a $2 buffer there. Rising above the pivotal point would mean his start of pyramiding, an extremely risky strategy not for beginner traders to use. Additionally, Livermore refused to average down a losing position which is purchasing more shares of an investment, even after the price has dropped, decreasing the average price at which the investor purchased the stock. He also never met the margin call, which is when the investor’s equity falls below a certain required level called the maintenance margin. Trading stocks with a margin is risky and should not be attempted.

The Implementation – Can we do it?

Websites like Bankrate have directed readers and those who struggle with financial issues to the Financial Planning Association or FPA, which claims to “provide a clear picture of your financial situation and how the right course of action can turn financial challenges into opportunities for a better path forward.” I signed up to become a member to access all the resources they offer. Many of them are business-building techniques not created to enrich different occupations’ individual financial success. Unfortunately, when you look up “financial services to help people create financial plan,” the only programs that come up are online or paid-for programs to help with personal finance, which is counterintuitive for low-income and digitally isolated New Orleanians. Data in The 2016 New Orleans Cultural Economy Snapshot shows that about 42% of these participants need additional income to support their household or themselves.

The solution lies beyond the hands of the government and the internet and lies with the community and individuals to bring financial stability to the city’s most critical contributors.

Like Jesse Livermore, Press Kabacoff made his own wealth by investing in real estate in the Bywater. Though he contributed to the denitrification of the Bywater, he was able to advocate for a way to create rentable spaces for artists at a livable rate. He worked to create Bywater Art Lofts 2 worth $11.3 million. There are 30 affordable units for artists in New Orleans in the Bywater Art Lofts 2. One of the main issues with the project was “Internal Revenue Service ruled that artists could not be considered an appropriate category of people to receive affordable public housing.” Kabacoff worked together with other developers and nonprofit organizations from areas beyond New Orleans to have the ruling appealed.

A photo of the Bywater Artist Lofts

Thirty lofts are not many lofts compared to the number of artists in New Orleans who need housing. Suppose Kabacoff was able to find the resources and money for renovating a historical building in the Bywater. In that case, he may be able to take on a larger project like renovating the abandoned 2,680-bed Charity hospital. Nola.com reports that it could be a 300-million-dollar renovation project. However, the Bywater Artists Lofts 2 secured 10 million for those renovations. Allotting just that sum of money once more for a similar number of units is, by the example of these lofts, doable. This renovation would create more housing for artists in an area on the west side of the downtown New Orleans area places to live. Though renovating the entire hospital may be a feat, it would have been considered the second-largest hospital in the country if still operating. Certain buildings or wings can be renovated for public artist housing. Moreover, there are building downtown and closer to the quarter district where a lot of the art in the city is featured.

Furthermore, the nonprofits that worked with him to get the ruling appealed should offer financial plans to help these artists earn extra income while living in these artists’ lofts. The Music and Culture Coalition of New Orleans “has been organizing, empowering, and advocating with New Orleans’ musicians, artists, traditional culture bearers, and other members and allies of the cultural community” since 2012. They are one example of a nonprofit that Kabacoff could work with for another similar project. This nonprofit looks to offer resources to help artists in New Orleans, including financial literacy tools and information. Information for personal investment can and should be added to the literacy info on this website to give performers a plan from a trusted source that, at its core, is looking out for the best interest of performers. The financial plans for the artist if the city so values them and the tourist need to be given other ways to support themselves if streets like Frenchman are not going to charge covers. “A lot of people think we can charge a cover and the same number of people will come through the door. That’s just not the case. We’ve charged a cover before in the past with the regular street bands. We don’t get half the people that come in, and we’re the biggest place on the street,” Brian Greiner says. Covers are not the solution; financial planning and affordable housing are. Almost a fourth of the participants in the 2016 New Orleans Cultural Snapshot Report stated that they would benefit from financial planning and management knowledge to help support their income or cultural work endeavors.

Financial plans, along with affordable housing, will solve the problem of low income for artists and performers in New Orleans because there is no solution to the problem within the system. Educating artists about investment opportunities and plans can allow artists to focus on their work while accumulating wealth at the same time. Artists do not have typical work hours, as performances and art showings can happen at night and on weekends. Artists who are not practicing their work can profit from the market. Providing financial planning during and before being able to provide artists with housing can allow artists to move through this public housing process and then become financially stable enough to let other artists take their loft. Using the formula of an induvial like Jesse Livermore or Press Kabacoff, who has already made their wealth using their own system, can be passed and used to help others create their own wealth and system of success. However, the limitation to this practice when subject to New Orleans living is the digital divide in New Orleans, which was especially highlighted by the pandemic. Unfortunately, statics show “depending on the study, researchers concluded that between 23% and 33% of New Orleans households lack home Internet and roughly 21% do not have a computer.” Online investing requires intermittent access to your online account. Depending on the short-term investment goals, the account owner may want to check their account biweekly or monthly. Nonprofits can work to provide resources and information about where public digital access is available not only to tenants in places like the Bywater Artist Lofts but to all New Orleans artists and musicians. Digital access is key to the success of this plan as the point of the proposed program would be to help individuals gain wealth to then move out of artist housing. If Kabacoff was able to secure 10 million dollars for housing funding, Kabacoff and nonprofits should be able to propose funding close the digital divide and provide in-house access to the internet for tenants. The best-case scenario is that funding can be accumulated to put public computers in artists’ housing for all tenants to share.