Are you finding it difficult to manage your money as a musician? Do you have a system you follow, or do you just wing it?
In this episode of The New Music Industry Podcast, I reveal the steps I’ve taken to manage my finances, and what has worked for me.
- 00:14 – Disclaimer
- 00:32 – Tips for managing your personal finances
- 02:13 – Percentages are your friend
- 02:42 – Tips for managing your business or career finances
- 03:23 – Final thoughts
Thanks for joining me. Today I want to talk about managing your money. Now, I’m not an accountant or financial expert or anything, so please seek professional advice if you’re looking for more qualified advice on this topic. These are just a few things I’ve picked up over the years and I’m sharing them in hopes that they will benefit you.
First, I’ll address personal finances. I would suggest setting up three different buckets of savings. The first is your emergency fund. This is where you should save roughly six to nine months of your expenses, whatever amount that you’re personally comfortable with if you needed to fall back on it at some point.
The next is your guilt-free entertainment fund. We tend to put off a lot of things in life and delay gratification. That’s fine if you’re working towards a specific goal. But ultimately, we never know when we’re going to be done here, so you should go and have fun while you can still have it. That’s what this fund is for. Whatever it is that you want to do now, whether it’s a vacation or weekend outing, you want to use the money that’s in your entertainment fund to go and do that sooner rather than later.
The last one is your aggressive growth fund. With your emergency fund and entertainment fund squared away, the only thing left to do is invest your money. A lot of people are naive and assume they will never need to invest, that’s simply not the case. The sooner you can begin saving, the better I find. If you already have an emergency fund, you’re basically playing with money that you’re okay to lose and that’s really the best position to be in when you’re investing.
If you could pay into each of these funds regularly, that would be ideal, but I haven’t found that to be easy. So, I would suggest starting with your emergency fund. And once that’s a built up, gradually put money into your entertainment and aggressive growth fund. I would suggest saving at least 10% off the top of every paycheck, 20% if possible. As your income goes up, you’re going to be paying more taxes, so you want to be prepared for tax season and not be caught off guard or be taken by surprise.
One more thing I will say before moving into business or career finances is “percentages are your friend”. I like working with percentages a lot. For instance, after a check is deposited into my account, I will take 10% of that to pay down one credit card. I will take 10% of that to pay down another credit card. And I will immediately save 10% or 20% off the top, but that still leaves me with 60% to 70% of the lumpsum for my daily expenses.When it comes to personal finances, percentages are your friend. Click To Tweet
Now, let’s talk about business or career finances. First of all, I suggest opening a no-fee bank account, not a business bank account, which can be costly. If possible, pay all your earnings as a musician into this no-fee bank account. You can still pay yourself out of the lumpsum, but it’s important to save as much as you can, because there are many expenses associated with running a music career.
Also, you should effort to pay all your career related expenses out of this no-fee bank account. That way, you’re never going into debt, and you’re never overextending yourself unnecessarily. You just look at the amount that you have in your account and that’s the amount you have to spend.
If you master these simple tips, I believe you’ll be well on your way to establishing a strong financial foundation for your life and your career.