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Financial Planning

7 Financial Tips for Professional Musicians

Just like a career in music, achieving prosperity is the product of years of planning, deliberate work, and making sound choices. Being a professional musician is different from other traditional careers and can pose a unique set of financial challenges. Here are seven ways professional musicians can improve their financial future:

  1. Think like an entrepreneur. You are dedicated to your art; be sure to not neglect your business, because you are indeed a business. What would a business owner do? Develop multiple sources of revenue (different gigs, styles, teaching, administration, etc.) to diversify your income stream and have the flexibility to change when opportunities arise or go away. Entrepreneurs don’t do everything themselves or try to know everything. They enlist professionals – financial planners, CPAs, attorneys – to make sure they are doing things right.
  2. Set Goals. The myth is that all musicians were born with a talent. The reality is that we’ve spent thousands of hours over many decades practicing, learning from masters (and colleagues), and competing to reach the highest levels of performance. If musicians spent even a small fraction of that energy on setting financial goals, taking steps to save, and educating themselves about money, they would be incredibly successful. Professional musicians are as driven and dedicated as Olympic athletes or chess champions. If we can apply that same process and focus to financial planning, the sky’s the limit. It doesn’t matter if you change your goals later on, the important thing is to get started today and not wait another year to start saving and planning for your future.
  3. Emergency Fund. The common rule of thumb is to keep 3-6 months of living expenses available in cash for emergencies. For musicians, I’d extend this to 6-12 months if you can. Your income can be highly variable, and if you can’t work, your income goes to zero. Read my top tips on How to Save More as a Musician.
  4. Be proactive to reduce taxes. The more money you keep, the more you have earned. Be organized with your receipts and records and aim to learn and improve your tax situation each year. Don’t wait until April to think about your deductions. If you have a dedicated practice room, be sure to use the home office deduction. Read The Musicians Guide to Mileage and Deducting Concert Clothes. If you have both salary (W-2) and self-employment (1099) income, try to deduct general expenses against your self-employment income on Schedule C. Take every opportunity to reduce your taxes. This takes some time, effort, and organization, but is well worth the effort.
  5. Think in terms of Assets and Liabilities. Grow your assets (investments, retirement accounts, cash, real estate) and have a plan to eliminate your liabilities (credit cards, student loans, mortgages, etc.). Aim to be debt free before retirement and get that stress out of your life. The earlier you start a retirement plan, the more you will have at retirement age. Read The Musician’s Guide to Choosing a Retirement Plan.
  6. Don’t skip insurance. I know a lot of musicians who are uninsured or under-insured. Don’t forgo health insurance at any age. Make sure you have coverage for home and auto that will actually protect you. If you can get a disability policy, make sure it covers “own occupation” (being a musician) and not “any occupation”. If other members of your family are dependent on your income, you need a life insurance policy. I recommend term insurance for 95% of the people I meet. Learn about Umbrella Policies.
  7. Be a good colleague. Working musicians know that their livelihood depends not just on their skills, but on their relationships with other musicians. Being easy to work with is essential to getting called back, being recommended for other gigs, being granted tenure, and maybe even winning a job or audition. A positive attitude is a tremendous asset in a field which is competitive, high pressure, and full of challenges. Be someone that you’d want to be around. Optimists are going to be more successful as musicians, as well as with their finances.

If you want to discuss what steps to take with your finances, you don’t have to go it alone. Give me a call and let’s talk about what you want to achieve.