Five Tips for Saving Money Between Gigs and Royalty Checks
By Darren Sussman (IFWA Founder) & Alicia Figueroa (IFWA Senior Educator & Coach) • September 19, 2019
What's the one thing all musicians and songwriters have in common when it comes to their income? Fluctuation. Whether you have a chart-topping hit, are in the middle of a successful tour, or are seeing some royalties appear for the first time – rest assured, your monthly income is likely to change. It may go up, and it may go down – for career musicians and songwriters, this is pretty much a given and a standard way of life. And it’s not a bad thing, provided you are prepared and plan accordingly. The good news is there are ways to set yourself up for success and make sure you are consistently saving for the future and not caught off guard when there is a pause or break between paychecks.
Tip One: Know Precisely What You Need
First things first: make sure you truly know your baseline budget. What exactly does it cost you to live each month? If you have not already gone through this exercise, do it. You can use a good old-fashioned notebook, Excel spreadsheet or an online budgeting tool.
The most important part of this exercise is to be precise. Make sure you include all your fixed expenses like a mortgage, rent, food, utilities, car payments, etc. But also include a realistic amount for variable costs you will generally incur. This exercise is critical to plan and foresee a path to consistent savings and less stress.
Also, be realistic about your variable expenses – look back on bank statements from the past to see how much you spend on things that aren’t necessities. Try to use this as an opportunity to plan to have a budgeted goal for the variable expenses.
Tip Two: Understand Your Debt and Control It
Many of us plod along not truly understanding our debt and the implications of the interest we incur. Debt issues get in the way of saving for our future; they will almost always create stress and ultimately affect our ability to be creative and focused. There is no one-size-fits-all answer to managing debt – there are a lot of variables. First and foremost, get it all down on paper. Know each loan, the interest rate, and if it’s good debt or bad debt. For example, mortgage debt can be considered “good debt” because you are borrowing money to build equity and have a home and it is tax-deductible. Credit card debt, on the other hand, is generally “bad debt” because it usually carries a high interest rate, is not being leveraged for longer-term goals, and it is not tax-deductible. Make sure you have it all laid out and understood. If you can, start paying down all your bad debt and get rid of it. If you need assistance and your debt is not manageable, get help immediately. There are resources out there that can help – just be careful and make sure you choose the right solution.
Tip Three: Understand Your Income
While there is likely to be fluctuation in your income from songwriting and live performances, try to get a sense of what you can expect and factor in any other income streams you have or can create. Be conservative, but aim to come up with some type of realistic estimate. Obviously, you need to have this number higher than the number you establish from tip one.
Tip Four: Establish an Emergency Reserve
Before you start investing or saving for the long term, make sure you are protected for the short term. Aim to set aside at least three to six months’ worth of baseline expenses in a cash-accessible savings account. This is the crucial piece to helping you weather a low-income storm.
Tip Five: Pay Yourself First
How do you consistently save for the future? Here is a simple way to do it.
Establish two bank accounts. One account is your operating account. This is where your income goes and where your expenses are paid from. However, set up a savings rule with the other account. Each month, transfer a set percentage or dollar amount of your income to “pay yourself first” into the other account. Consider this an expense and plan for it. Each month you will know that you are being consistent in a savings method and it can be a stable force in your financial future. When larger amounts come in, you may want to contribute more to savings and other options. When it’s leaner times, at least you know that some money is still being set aside for your future self.
One Last Note...
Just like making music, planning your finances and saving for the future is an art. It is not an exact science. These tips are a good way to get you on the right track and create some consistency with an inconsistent income. But remember: be gentle with yourself and understand things will change and address them as they do. Make sure to surround yourself with supportive and winning people. Have the right financial team in your corner with a good accountant, lawyer and financial planner.
The Institute of Financial Wellness for the Arts (IFWA) provides valuable financial education and planning solutions to everyone in the arts and entertainment industry. Learn more about IFWA’s Complimentary Financial Coaching & Planning Resources.