What to Do With Your Money After Selling Your Catalog

Congratulations! You just sold your music catalog for life-changing money. Whether it's $500K, $5M, or $50M, this is a pivotal moment in your life. What you do in the next 90 days will determine whether this windfall secures your future or disappears in a few years.

At Creative Funding Agency, we don't just help artists sell their catalogs—we care about what happens next. This guide will walk you through the critical steps to take after your sale closes, from dealing with taxes to building lasting wealth.

First Rule: Don't Touch the Money for 90 Days

Before making ANY major purchases or investments, take time to build a financial plan. The biggest mistakes happen in the first few months when emotions are high and pressure from friends/family is intense.

Step 1: Handle Taxes Immediately

This is not optional. The IRS will come for their share, and if you spend it all, you'll be in serious trouble.

What You'll Owe

• Federal Tax: 0-37% depending on income bracket (likely 24-37% for large sales)
• State Tax: 0-13.3% depending on your state (CA highest, TX/FL/TN zero)
• Capital Gains vs Ordinary Income: May qualify for lower capital gains rates if held >1 year
• Total Tax Bill: Expect to owe 30-50% of your sale proceeds

Action Items:

Hire a CPA specializing in entertainment/music immediately
Set aside 50% of your proceeds in a separate account for taxes
Make quarterly estimated tax payments to avoid penalties
Explore tax optimization strategies (charitable trusts, installment sales, etc.)
Consider relocating to a no-income-tax state BEFORE the sale if possible

Step 2: Build Your Financial Team

Don't try to manage millions alone. You need professionals who work for YOU, not for commissions.

Your Core Team Should Include:

1. Fee-Only Financial Advisor (Fiduciary)

NOT commission-based. Charges flat fee or % of assets (typically 0.5-1%). Must act in YOUR best interest by law.

2. Entertainment CPA

Specializes in music industry taxes, royalty income, and complex deductions. Not your local H&R Block.

3. Estate Planning Attorney

Sets up trusts, wills, LLCs to protect assets and minimize estate taxes. Essential if you have $1M+.

4. Business Manager (Optional for $5M+)

Handles all financial affairs, pays bills, coordinates with advisors. Common in entertainment for large fortunes.

Red Flags to Avoid:

❌ "Financial advisors" who make commission on products they sell
❌ Anyone promising guaranteed 15%+ returns (it's a scam)
❌ Friends/family offering to "invest it for you"
❌ Pressure to decide immediately
❌ Complex investments you don't understand

Step 3: Create a Financial Plan

Work with your advisor to answer these key questions:

✓ How much do I need to maintain my current lifestyle forever?
✓ Do I want to keep making music, or retire?
✓ What are my annual expenses? (Be honest!)
✓ Do I have dependents to support?
✓ What's my risk tolerance for investments?
✓ Do I want to leave money to heirs or charity?

The 4% Rule: How Much Can You Spend?

A general rule of thumb: you can safely withdraw 4% of your portfolio annually without running out of money.

After-Tax Proceeds	Annual Safe Spending (4%)	Monthly Income
$500K	$20,000/year	$1,667/month
$1 Million	$40,000/year	$3,333/month
$2 Million	$80,000/year	$6,667/month
$5 Million	$200,000/year	$16,667/month
$10 Million	$400,000/year	$33,333/month

If your lifestyle costs more than 4% annually, you'll need to either reduce expenses or take on more investment risk (not recommended).

Step 4: Smart Investment Strategy

Your goal is to preserve wealth and generate steady income, not get rich quick. Here's a sensible allocation for most artists:

Conservative Portfolio (Recommended for Most Artists)

40%

Stocks (Index Funds/ETFs)

Diversified portfolio of US and international stocks. Expected return: 7-10% annually over long term.

30%

Bonds (Government & Corporate)

Stable income with lower risk. Expected return: 3-5% annually.

20%

Real Estate

Rental properties or REITs for income and inflation protection. Expected return: 5-8% annually + appreciation.

10%

Cash/Emergency Fund

High-yield savings account. 6-12 months of expenses for emergencies.

What About Alternative Investments?

Once you have your core portfolio set up, you can consider small allocations (5-10%) to:

Music Royalty Funds: Invest in other catalogs (yes, you can be on both sides!)
Private Equity: Stakes in music/entertainment companies
Startups/Venture Capital: High risk, high reward opportunities
Cryptocurrency: Only invest what you can afford to lose entirely

⚠️ Warning: Don't Put All Your Money in One Thing

We've seen artists lose everything by investing their entire sale proceeds in a "can't miss" opportunity (restaurants, crypto, a friend's business). Diversification is not exciting, but it works.

Step 5: Buy a Home (But Be Smart About It)

It's natural to want to upgrade your living situation. Real estate can be a great investment, but don't go overboard.

Smart Home Buying Rules:

✓ Spend no more than 25% of your after-tax proceeds on a home
✓ Buy in cash or put down at least 50% to avoid debt
✓ Budget for ongoing costs (property taxes, maintenance, insurance)
✓ Don't buy until you've lived in the area for 6+ months (avoid impulse)
✓ Consider how it fits your lifestyle—do you really need 8 bedrooms?

Example: If you have $3M after taxes, a $750K home is reasonable. A $2M mansion is not, unless you have other income.

Step 6: Plan for Retirement

This might be your ONLY major payday. Make it last.

Tax-Advantaged Retirement Accounts

Solo 401(k) or SEP IRA

If you're self-employed, you can contribute up to $66K/year (2026) to reduce taxes.

Roth IRA

$7K/year contribution limit, but grows tax-free. Great for artists expecting their catalog sale to be their highest-income year.

Taxable Brokerage Account

For amounts above retirement account limits. More flexible but less tax-advantaged.

Step 7: Protect Your Wealth

Estate Planning Essentials

Will: Who gets your money if you die? Without a will, the state decides.
Trust: Protects assets from creditors, lawsuits, and reduces estate taxes.
Power of Attorney: Who makes decisions if you're incapacitated?
Beneficiary Designations: Update on all accounts, insurance, retirement funds.

Insurance You Need

✓ Term Life Insurance: If you have dependents (spouse, kids)
✓ Disability Insurance: If you plan to keep working
✓ Umbrella Liability Insurance: $1-5M coverage for lawsuits
✓ Health Insurance: Don't skip this even if you feel healthy

Step 8: Handle Friends & Family

This is often the hardest part. Everyone will suddenly have "investment opportunities" or need "loans."

Strategies for Saying No:

• "My financial advisor handles all my money, I can't access it"
• "It's all tied up in taxes and investments"
• Set a "giving budget" (5-10%) for helping loved ones, then stop
• Make clear: gifts, not loans (never expect repayment)
• Don't feel guilty—your financial security comes first

Step 9: Give Back (If You Want To)

Charitable giving can be personally fulfilling AND provide tax benefits.

Donor-Advised Fund (DAF): Contribute now, get tax deduction immediately, give to charities over time
Charitable Remainder Trust: Get income now, charity gets remainder when you die
Direct Donations: Support causes you care about (music education, local nonprofits, etc.)

Common Mistakes to Avoid

❌ Lifestyle Inflation: Buying cars, jewelry, vacations before building your financial foundation

❌ No Tax Planning: Spending freely and getting hit with a massive tax bill you can't pay

❌ Bad Investments: Putting money in things you don't understand or that promise unrealistic returns

❌ No Professional Help: Trying to manage millions yourself without experts

❌ Saying Yes to Everyone: Giving or lending money until it's gone

Final Thoughts

Selling your catalog is a major financial event. The difference between artists who build lasting wealth and those who lose it all comes down to planning, discipline, and getting the right advice.

Take your time. Build your team. Think long-term. Your music created this opportunity—now make sure it lasts for the rest of your life.

You worked hard to create your music. Now work smart to protect your future.