As a musician, it's easy to get caught up in the excitement of performing and creating music. But managing your finances can be just as important as honing your craft. Musicians often face various unique financial challenges, such as irregular sources of income, high equipment, and touring costs, and the need to constantly seek out new gigs. That's why it's crucial for musicians to have a handle on their personal finances, not just their business finances, and to take steps to achieve financial stability.
This blog post contains tips and resources for musicians to manage their personal finances better and achieve financial stability. Whether you're just starting your music career or are an experienced performer, these tips will help you take control of your financial future.
A quick note on business finances: this article is about healthy personal finance habits.
While it is tempting just to have one bank account and mingle your business and personal finances, especially at the beginning of your career, it is much easier to keep your finances organized if you separate the two. And if you have an LLC, it is crucial to keep them separate. If you need more clarification about the best business structure for your career, you can check out this resource on business entities for musicians.
One of the most important things you can do in financial planning is to create a budget. This will help you track your income and basic living expenses and ensure you're spending appropriately. However, it can be tricky to create a budget when you have an irregular income stream. One solution is to average your income over the past year and use that number as a starting point for the income portion of your budget. You can also set aside a certain percentage of each gig's earnings for expenses and, if possible, savings. We'll talk more about savings goals later in this article.
This might seem obvious, but spending less than you earn is a fundamental principle of personal finance. When you spend less than you make, you can save and invest a portion of your income, which can help you build financial stability and prepare for the future. When you spend more than you earn, you may have to rely on debt to make ends meet, leading to financial stress and difficulty paying bills. Additionally, spending less than you earn can help you live within your means and avoid financial problems. Without a budget, spending more than you make is easy since you have yet to set time to be intentional about understanding your income and priorities for spending. By consciously spending less than you earn, you can take control of your finances and set yourself up for financial success.
As a musician, having a savings plan is essential, as your income might be less predictable than in other careers. This includes an emergency fund and a retirement plan. An emergency fund is a stash of cash that you can tap into in case of unexpected expenses, such as medical bills or car repairs. Again, being a full-time artist often means having different access to health insurance than those in other careers. It's a good idea to aim for at least three to six months' worth of living expenses in your emergency fund, according to Forbes.
Another financial planning basic is that it's always early enough to start thinking about retirement. Consider setting up a retirement account, such as a 401(k) or IRA, and contribute a portion of your income to it each month; this could be as small as $50 or even $5 and set up automatically through any financial institution. This will help you build a nest egg for the future and ensure that you're financially secure should you decide to move on from music later. When you add all these things up, it can seem daunting. But just like anything else, you can reach these long-term goals by chipping away bit by bit.
Educating yourself on personal finance is important because it helps you make informed decisions about your money and improve your financial habits. When you understand financial concepts and tools, such as budgeting, saving, and investing, you can better manage your money and achieve your financial goals. Financial literacy can also help you avoid financial pitfalls, such as accumulating debt or making poor investment decisions. By learning about personal finance, you can set yourself up for financial success and stability. Many resources are available for learning about personal finance, including blogs like NerdWallet, books like Your Money or Your Life, and it's never a bad idea to seek advice from local financial advisors from trusted companies. Using these resources to increase your financial knowledge and improve your financial well-being is a good idea.
As a musician, you likely have a lot of expenses, such as equipment, recording, rehearsing, and travel. Reducing costs is vital for several reasons. First and foremost, it can help you save money and increase your overall financial stability. When you reduce your expenses, you have more money available to put towards savings, investments, or paying off debt. Lowering costs can also help you achieve your financial goals, such as saving for a down payment on a house, building an emergency fund, or other personal or professional goals requiring more significant sums of money.
Additionally, reducing expenses can help you live within your means and avoid financial stress or needing more debt. Finding ways to cut back on costs can improve your financial well-being and set you up for long-term financial success. It's also important to track all your business expenses and understand which expenses count as tax deductions for working musicians.
In addition to managing your day-to-day finances, it's essential to protect your financial well-being in case of unexpected events. This includes getting insurance, such as health and instrument insurance. Obviously, the music industry doesn't offer health insurance to independent artists, but marketplace options are available. Likewise, if you have a spouse working full-time or are under 26 years old, you may be able to join the workplace coverage of that family member, depending on their coverage options.
Personal finance is essential for everyone. But musicians are working against extra obstacles and thus have an even greater reason to stay on top of their finances. By creating a budget, saving for the future, educating yourself about financial matters, reducing expenses, and protecting your financial well-being, you can take control of your financial future and focus on your music career. For more information on personal finance, consider seeking online courses or working with a financial planner who can give you further peace of mind.
It is important to separate business and personal finances as a musician to keep your finances organized and to avoid potential legal or tax problems. Mixing the two can make it difficult to track expenses and income, and if you have an LLC, it is crucial to keep the finances separate.
One solution to create a budget with an irregular income is to average your income over the past year and use that as a starting point. Another option is to set aside a portion of each gig's earnings for expenses and savings.
Spending less than you earn as a musician is important because overspending can lead to financial stress and difficulty paying bills. By spending less than you earn, you can live within your means, avoid financial problems, and set yourself up for financial success.
Saving for the future is important for musicians because their income can be less predictable, and it is essential to have an emergency fund and a retirement plan. It is never too early to start retirement planning. An emergency fund can help in case of unexpected expenses, and a retirement fund can ensure financial security in the future.
Educating oneself on personal finance is important for musicians because it helps make informed money decisions and improve financial habits. Financial literacy can help avoid financial pitfalls and set a foundation for financial success and stability.
You can use free tools like Google Sheets, and Green Room to track your finances, paid options like Quickbooks, or go the services route and hire a business manager. Regardless of your chosen method, it's important to stay consistent and update your income and expenses regularly. This will help you stay on top of your finances and avoid any potential financial problems down the line.
As the founder of Green Room, Sophie Randolph is dedicated to providing innovative solutions that empower touring entertainers to take control of their careers. Before Green Room, Sophie worked in operations and customer success roles for startups, managed emerging artists, and completed her MBA at Rice University.
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