In the right hands, money is a valuable tool for furthering a worthy vision.
In the wrong hands, money is little more than a means to an end.
The problem (or prospect) isn’t with money – it’s with the individual using it!
Some have a lot, and some have a little. For those that have a lot, getting more can be easy. For those that have a little, getting more can be difficult.
But management is all that really matters. You won’t necessarily be any happier when you have more money – you’ll simply have more security and more options.
How you choose to spend, save and invest makes all the difference. We all eat, we all need a place to sleep, and most of us have to pay for some form of transportation. If you’re serious about a music career, you will have to pay for a lot of other things too, like travel, CD replication, or recording sessions.
So the goal is to learn how to manage well. Once you’ve developed the right habits, decisions concerning money will become simpler. Here are five money management tips for musicians.
Money Management Tip 1. Get Out & Stay Out Of Debt
If you are in debt, you need to recognize that there is nothing more crippling. It doesn’t just affect your music career – it affects your life. It severely limits your options and even has a negative impact on your overall well-being.
“I’m fine,” you may say, but keep in mind that you’re trying to do something most people don’t do by pursuing your passion. You’re trying to do something extraordinary. That means you can’t just fall in line with the crowd and keep doing what clearly isn’t working. If everyone is doing things one way, run the other way and try a different approach.
There aren’t too many “acceptable” forms of debt if you’re committed to seeing your dreams come to pass. If you have a mortgage, you may want to rethink your priorities. If you have a car loan, realize that a quality 10-year-old car can be purchased for roughly 10% the value of a brand new one. Sell your new car and get a cheaper one.
There’s plenty of time to scale up your lifestyle later. You can get money back, but you can’t get time back. If finances are holding you back from pursuing music wholeheartedly, you’re in a more desperate situation than you even realize.
Live like no one else will now so you can live like no else can later.
Tip 2. Open A Separate Checking Account For Your Music
Disputes often come up in bands over money because there’s one or two members footing most of the bills while everyone else is balking at the idea of pitching in to pay for a recording session, a new merch item, travel, or membership dues.
Whether you’re a solo artist or in a band, you need to open a separate checking account for everything music related. You need to tough it out and start saving most of your music income in the account. If your band members absolutely insist on being paid from a gig, agree on a percentage that makes sense and save the rest.
Now you have a band or artist fund. Keep an eye on this account so you know exactly how much is coming in and going out. Only make financial commitments when you have the appropriate amount of money to do so.
Oh, and don’t bother opening a business account – it’s expensive. Get a no-fee account and say that you will be using it for personal purposes.
3. Save At Least 10% Of Your Income From Music And Outside
It probably sounds trite, but as it turns out, saving 10% of your income is sound advice. The problem is that most people don’t do it.
You need to get into the habit of paying yourself first. We all have bills. But most people prioritize their bills over themselves! How does that make sense? Do you really care more about your cable provider than your own future?
I know, I know, you probably have debt that needs to be paid down, but indulge me. Pay that 10% into a savings account as if you were paying a non-negotiable fee to the government. Make it the first thing you do whenever you get money.
Then, if possible, try not to touch those savings. You need an emergency fund – preferably six to nine month’s worth of expenses. If you absolutely must use the money, start over and make the effort to get back on track as soon as you can.
Then, keep saving 10%, long after the need has gone.
4. Reinvest In Your Music Career
You just made a ton of money from your music – congratulations! You can celebrate if you want to, but now’s not the time to blow it all on parties.
If you’re disciplined about reinvesting in your music career, you’ll be able to scale up your gear, your image, your marketing, your performances, and so on. This will inevitably lead to bigger and better opportunities.
What most bands do when they get a windfall is waste their newfound “wealth” on trivial things. It makes sense – they probably never had that much money before.
But a smart band knows that they can really build on their momentum by putting that money back into the future of their careers. You have to be willing to bet on yourself.
5. Create Multiple Streams Of Income
Don’t think too long and hard about this. All we’re really talking about is diversifying little by little.
At first, you may only have income from the gigs you play. But from there, you can start putting out releases, create merch, collect royalties from ASCAP, start a fan club, get your music placed on a TV show, and so on.
If you want to take a more aggressive or outside-the-box approach, you can create information products (i.e. a how to play guitar DVD), become a music teacher, start your own magazine, freelance as a writer, and so on.
The entrepreneurial approach isn’t for everybody – it just depends on how you want to leverage your talents. Ultimately, the key thing is to have less dependence on any one income source. The more streams you have as a musician, the better.
When it comes to money, it can take time to get wrong thinking out of your head. Many of us grew up hearing that “money is evil.” Many of us were taught, through example, to despise the rich. This conditioning gets in the way of your success.
Money is but a tool. “Good” or “bad” depends entirely on the person.
Pursue a vision that you value, and put greater emphasis on becoming a good manager of money. Open your mind to the possibilities.