#BudgetSmart
Finances or lack thereof can be the downfall of any business. If you’re an independent musician trying to earn a living or even part-time income from your music, it’s uber important to keep track of your finances so that you can maximize your income and potentially make more money. We can all agree that budgeting is not super sexy, but if you can learn to master your budget, you’ll be able to gain control over your finances instead of the other way around. In this article we’ll discuss practical ways to organize and manage your money as an independent musician. In addition, we’ll also uncover ways you can earn even more money by just making simple changes to your budgeting practices.
Here’s how to manage and organize your money as an independent musician.
The first step to gaining control over your finances is to organize your income and spending in such a way that allows you to see what is actually going on. Budgeting can be difficult because it takes time to create a system, then it takes time to track your spending and income. But it all pays off when you can look at your income and spending habits and make better, more informed decisions. In this section we’ll go over simple things you can do to organize and manage your finances.
1. Use a budgeting spreadsheet and Do a zero-based budget.
It’s quite fitting that our first budgeting tip is to simply keep a budget. Not having a budget though is like going on a road trip without any maps or GPS to tell you where you’re going or where you currently are.
A good budget will first of all help you plan ahead, showing you how much money you will have to spend for any given month and where it will all need to go. It will also take luck out of the equation, showing you whether you will have a surplus or a deficit. And as you go through the month, it will show you how your tracking and whether you need to make adjustments.
It takes a little bit of time to set-up and close-out each month, but if you input expenses as you make them, it can be a lot easier to maintain. Overall though, without keeping a budget you will be lost.
Check out NerdWallet’s list of free budgeting spreadsheets.
2. Approach booking based on income needs.
Once you’ve established a budget and know exactly how much is needed for monthly expenses, you can then start to really book towards those needs. Set a monthly goal based on your budget and as you start to book shows, note how much you think you’ll be bringing home for each one. Consider guaranteed payments plus potential extra earnings like tips, percentages, and merchandise sales. Don’t forget to subtract any expenses related to the show like gas, lodging, parking, commissions, etc. Most of all though, be realistic. As you continue to fill up your calendar with bookings, you will also be able to see income projections for any given month. This will help guide you on what months you need to focus on. Obviously, this is based on booking 6 months to a year in advance.
Take the free How to Book [Profitable] Gigs Course to supercharge your booking efforts for profit!
3. Try to earn more than you need.
As you use Tip #2 and book shows based on your income needs, we strongly suggest that you give yourself a little cushion if possible. In other words, if your monthly expenses are $2,650, then you should shoot to bring home $3,000 a month if you can. The more of a surplus that you have, the more freedom you’ll have to pay off debts or better yet, save!
4. Plan according to low earning months.
While using Tips #2 & 3, you might also start to find that you don’t earn the same amount every month. In fact some months might be significantly less than others. Once you know this, you can plan around it a couple of different ways.
One way is to try and adjust your expenses to align with your lowest earning months. If things tend to slow down a little for you during the winter months like they do for us, then you can figure out what you make on average during those months and try to decrease your monthly expenses to be below that number. For instance, if you make $4,000 on the good months, but can’t seem to make more than $2,500 in the winter, then maybe you can cut your overall expenses back to be below $2,500. If you can do that, then you’ll end up with a nice surplus throughout the rest of the year! You can use some of these savings tips to try and achieve this (#13, 14, 20, & 21).
Another approach is to save away on the good months to help out on the low performing months. So again, let’s say you earn $4,000 on your best months and $2,500 on your worst, but your monthly living expenses are $3,200. Then you would put money aside to make up for the $700 deficit on those bad months, and any other months where you might take home less than you need.
5. Get a month ahead on expenses.
Now that you’re a musician, you don’t get a nice consistent check every two weeks like you used to at the office. Instead, money trickles in throughout the month as you fulfill your engagements. Unfortunately, your bills and other needs don’t necessarily wait for the money to come in. On top of that, shows can get canceled or tips can be leaner than expected, leaving you with less for the month than you planned for. This is why getting a month ahead is so important. It might take you several months to save up a month’s worth of living expenses, but once you do, it will change your life! On any given month, you will be living off of the money you earned from the previous month, while saving the current month’s earnings for the next month. You’ll have all the money you need for that month right out of the gate, so there should be no more late bill payments. You will be able to go into a new month knowing exactly how much you have to work with, and if you did earn less than expected, you can make adjustments ahead of time. We’ve been doing this ourselves for a couple of years and it’s been amazing!
6. Open a business account.
This is a business, right? Then you should have a business account. Now note, when we say business account, we don’t necessarily mean an actual business account, as those tend to have aggressive restrictions beyond what us normal musicians can meet like a $25,000 daily balance. Maybe someday…. We just encourage you to have two separate accounts, one for personal spending, and one for your business. This will allow you to better keep track of your earnings, should help out with tax purposes, and overall should keep your finances more organized.
7. Give yourself a salary each month from your business earnings.
When you use Tip #6 and create a separate account for your business earnings, you can then start to give yourself a salary. This might vary each month based on fluctuating income or expenses, but the overall idea is that you’re putting the money in your business account first as opposed to going straight from your gig to the shopping mall with it. This allows you to put the business first and gives you some organization and structure. Whenever you take money away from the business, you need to have a good reason, and giving yourself a salary helps to drive this.
8. Save a percentage of your earnings.
Now, once you’ve started Tip #7 and are giving yourself a monthly salary, try to leave a little in there each month. This will become your business savings, which you can use for business expenses like equipment, marketing, etc. The more you can set aside, obviously the more you can pour back into your business. We started out by just holding $50 a month, which allowed us to afford basic music supplies and promotional materials.
9. Track all business expenses quarterly.
Not to be confused with your budget in Tip #1, which is for your personal finances, this tool is for your business finances. It will allow you to make goals for each quarter as well as track your progress and make adjustments as needed. It also gives you an easy way to report expenses and earnings for taxes each year. Here are some templates you can try from Fundera.
10. Create Profit & Loss Statements for your business.
Once you start using Tip #9 by tracking your quarterly and annual expenses, you can then learn to create Profit and Loss Statements for your business. This is a tool that compares the income to the expenses that you’ve made and will show whether you’re netting a profit or not. This tool will help you identify areas where you can cut back on expenses or increase income and can also be done quarterly and annually.
Here are some ways budgeting can help you make more money as an independent musician.
We don’t budget just for the fun of it. There is a lot more benefit to budgeting than simply staying organized. Budgeting allows you to find extra money, be more efficient with the money you do have, and gives you ideas for ways you can earn even more money. That last benefit might seem a little unbelievable, but take a look at the next set of budgeting tips for musicians to see what we mean.
11. Give yourself a raise. Raise your monthly booking goal each year.
In order to push your music business further, because yes, this is a business, you’ve got to continually raise the bar. As you start to book for the upcoming year, raise the amount you hope to earn each month (see #3). If your goal was $1,500, try increasing it to $1,750 or $2,000. This might mean booking a couple more shows/month than you did the previous year, or it might mean trying to graduate to more higher earning shows. Either way, constantly challenge yourself to make more from your music! Check out our guide on how to give yourself a raise here.
12. Consider multiple revenue streams.
As you forge ahead in your music career, you might struggle to earn the amount you need to live off of each month or later in your career you might even hit a ceiling. Either way, there might come a time where you’ll need to consider adding other revenue streams on top of what you earn from your music. Maybe you can do something else music related on the side like teach lessons or do instrument repairs. Or maybe you end up using that degree you worked so hard for after all by freelancing in that given field i.e. marketing, graphic design, accounting, etc. If you’re really crafty, you might even figure out a way to create a passive income where you create something like a product or a website, or maybe you invest in something, and then sit back while it brings in money. No matter what, don’t worry as this is perfectly normal and will not make you less of a musician. If you need help thinking of additional revenue sources, a good place to start would be our article, 5 Side Hustle Ideas for Musicians.
13. Remove extra expenses from your monthly bills.
In order to have some extra money every month, you might have to make some tough sacrifices. Maybe instead of getting coffee every day, you just get it twice a week. Maybe you cut back on eating out. Think about the ‘nice to haves’ in your life and consider scaling back. As an independent musician, you’re going to work hard, most likely even harder than you did before you quit your day job. Because of this, you definitely deserve to treat yourself regularly, just make sure it fits within your budget.
14. Seek out a lower-cost lifestyle.
If you’ve done #13 but things are still not adding up the way you’d like, you might need to make some even bigger changes to your lifestyle. Maybe you need to get a different phone service or change insurance providers. Maybe you need to cut back on what you spend on groceries every week. It’s also possible you might need to reconsider what you drive or even where you live.
We’ve had to make a few major changes during our journey. When we were first transitioning from part-time to full-time musicians, we had to come to peace with the fact that we would not be able to keep our beautiful two-story 4 bedroom house. Doing what we loved and having the freedom that comes with being traveling musicians was more important, so we gladly sold the house and half our possessions and moved into an apartment. Later, we realized we could save even more money if we built a tiny house and lived in that. We have not regretted either decision, as we’ve decreased our cost of living significantly while also simplifying our lives. Don’t worry though, we’re not saying you have to do these exact things, but there might be some changes you can make to your lifestyle that while scary at first, might actually free up a lot of money and time.
15. Stop using credit cards for things you can’t afford.
If used the right way, credit cards can be very useful and as you’ll see in a minute, can even help you get free stuff. But if abused, they can put you in a huge financial hole. The high interest rates alone can make it seem like you’re playing a game that’s impossible to win. If you are currently depending on credit cards, our advice is to figure out how to stop immediately. Use Tips #12, 13, & 14 to help build up your income and/or decrease your expenses so that you no longer need them. Focus on stopping first, so as to not get overwhelmed. After you do that you can then figure out how to pay them off (see Tip #16).
We’ve had to face this challenge ourselves. There was a point where we were working on a project for several months that required all of our time, and in the process we began depending on credit cards for 100% of our expenses. Needless to say, we accumulated a huge amount of debt rather quickly. Once the project was over, we made it our next project to build our income back up to where we no longer needed the credit cards. It took several months, but we were able to do it and put a freeze on our credit cards in the process.
16. Pay off your debt.
Believe us, we know it’s a lot easier said than done, but if you take it one step at a time, whether it’s credit card debt, or a student or car loan, it can be paid off. The first thing you have to do is stop the debt from growing (see (Tip #15), then you have to create some sort of surplus each month so that after you’ve covered all of your living expenses you have some money left over to put towards paying off the debt. The more money you can put towards it, the better. You should plan on paying above the monthly minimum payments if you can.
The biggest challenge can be overcoming high interest rates, which can have you paying a lot more than you initially owed. With credit cards, you can oftentimes transfer your debt to another card with a lower interest rate, which can make a huge difference. Some cards even offer no interest for the first year, so definitely try to move your debt over to those if possible.
When it comes to paying off multiple debts, there is definitely an art to it. The rule of thumb is to focus on the debt with the higher interest first, and then go down the line. You will still probably need to make the minimum payments on the other debts too though. We used this template when we were trying to pay off 5 credit cards! It should help you factor in the interests when calculating when your debts will be paid off.
Download the Worksheet
Turn your interests into revenue-generating strategies and start earning more income with your music.
17. Utilize travel rewards.
Now, for the fun side of credit cards! As you probably know, there are lots of cards out there that offer reward points. We’re here to tell you that they do indeed work. We’ve gotten free flights and hotels and have gone on two really nice trips for almost nothing, simply by charging reward cards for our regular expenses.
To do this, look for cards that give you lots of bonus points (40,000 or more) within the first 3 months. Once you get the big initial reward, you’ll probably need to move on to another card as the points will be minimal after that. You might need to use one card for hotel points and then another card for flight points. In some cases, you can also transfer points from one card to another within the same bank, which can be helpful. Especially since a lot of these cards tend to have annual fees, so once you transfer the points you can close the card and avoid the next fee. Be aware though, as some banks have a limit to how many cards they will issue to a person within a certain time span. In order to pull this off, you have to be organized to keep track of the points you have versus what you need, as well as just giving yourself enough time to do it (6 – 12 months). Most importantly though, make sure you’re only charging what you can immediately turn around and pay off, as you don’t want to go back into debt.
To get started with a credit card reward program, we recommend any of the Chase offerings. At the time of this writing, Chase Southwest is offering 40,000 points with any Southwest personal Credit Card and business owners can earn 60,000 points with the Southwest Premier Business Credit Card. Click here to join.
18. Use a high interest yielding account.
If you are trying to save money for any reason, definitely consider the interest rate of your account. Unlike credit cards, you want a higher interest rate for your savings account as that will increase your money’s growth. We’d say don’t settle for less than 1.5% if you can help it. We recently moved our savings from one bank to another, going from a 1.2% interest rate to one with a 2% rate. Also, make sure the interest is compounded daily, as that allows you to gain interest on your interest.
19. Deduct your expenses on taxes.
You might not have known this, but pretty much all of the expenses you make for your business can be deducted on your taxes. Here is an extensive list of all the expenses musicians typically have that can be deducted on taxes from FreelanceTaxation.com. As a self-employed individual, you may also be able to take health insurance and home office deductions.
A Mileage Log Book for Musicians
Whether touring regionally or internationally, this log book can help musicians keep track of distances traveled from day to day. It fits easily in the glove compartment or a backpack or music bag for convenient access. The mileage log book has extra pages for tracking travel expenses such as parking, toll, lodging, food, etc.
Other expenses include toll bridge fees, parking costs, meals (50%), gas, mileage, and lodging associated with touring. Gas, mileage, and lodging expenses would fall under the Business Travel category. Be sure to include meals while on tour in a separate category as you can only deduct 50% from this category. One other important factor is that the IRS has strict requirements regarding what constitutes as a ‘tour’. Specifically, business expenses can only be deducted when your trip involves sleeping over somewhere. A quick and easy guideline to follow is that you should only take business travel deductions if you also have lodging expenses associated with that trip. Be sure to review the official business travel deduction requirements outlined by the IRS before taking these deductions.
Overall, this requires that you keep a record of all your business expenses (use Tips #9 & 10). For mileage deductions, you’ll need to note the reading on your car’s odometer before and after your trips. Also, you should keep a copy of all receipts, just in case you do ever get audited.
These are just some guidelines to consider. Don’t take this as official legal advice and seek help from a professional accountant if you have any questions. If you’d like to read more on the subject, here are some takes from Turbotax and SonicBids, as well as another article we wrote a while back on Tax Tips.
20. Look for cost-effective lodging.
As a musician, the chances are you travel a little. Whether it be on an annual month long tour or several weekend runs throughout the year, most likely you’re going to have to spend some nights on the road. This is an area where you can definitely save some money, because a few nights at even just a 3-star hotel can really eat away at your earnings.
One obvious solution is to stay with friends and family. If you’ve got them in that particular city and are comfortable staying with them, go for it. There’s nothing like free lodging, right?
This can be imposing though, so if you want to be more independent, another free option is CouchSurfing.com. All lodging through this site is free. They do recommend that you extend a kind gesture to the host though like treating them to a meal or leaving a gift, which is a good practice anyways.
If crashing on stranger’s couches is not your thing, you can find some really good deals on Airbnb.com. We’ve been consistently using this site lately and have been able to find decent places all over the country for $60 and under. Just make sure you check the final price before reserving a room as the extra fees like cleaning and so forth can add up.
Another cost-effective option is camping. You can often stay at a state park or RV resort for around $30 a night. If you don’t have an RV or camper, you might be able to sleep in the back of your SUV or van and still utilize their bathrooms. If you’re really adventurous and the weather is good, you can always tent camp at a lot of these same parks too, often at a lower rate.
One other option to consider, which we’ve taken advantage of many times, is that some hotels host live music. If you’re able to book a night at one of these places as a performer, you might be able to also negotiate a free or discounted rate for a night’s stay. Make sure to discuss this up front though during the booking process.
21. Look for cost-effective meals.
This is another area that can really eat away at your earnings while on the road, pun very much intended. While it’s great to have three hot sit-down meals a day, chances are you’ll need to rethink that since you’re out trying to bring home money. One thing you can do is take a cooler full of ingredients and make your own meals. For breakfast you can have granola bars or pastries and some fresh fruit. For lunches you can have chips and sandwiches. Then maybe have a nice hot meal for dinner. If you have to eat out, a lot of fast food places these days have value menus where you can eat for under $5 a person. Also, if you’re performing at a place that serves food, you can often negotiate a free or discounted meal, but they’ll often give you less of a guarantee if going this route.
Most of all, give yourself time to build your systems and to also make mistakes. Having a good budget takes time and trial and error. What works for one person may not work for the other. This is not a test of speed. It’s a test of commitment. How committed are you to winning at your music career? One aspect of winning is being able to handle your finances in a way that gives you a profit at the end of the day. Consider using these practical budgeting tips for musicians to help you lay the foundation for a good business. Also, let us know in the comments section what budgeting tactics and tools have worked for you?
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This is like a financial tips bible for musicians. Great post, Rob!
According to me, The promotion and marketing of your music is very essential because it helps to establish your music career. The more you put into it, the more success you will gain.
We totally agree Johny! Promoting and marketing are indeed essential to a successful music career. That’s actually why this blog site was created…to encourage independent musicians in those areas where they might not be comfortable otherwise.
JACK GRASSEL
We have a designated “gig mobile”. There is a “tax loophole” that self employed folks and businesses can take advantage of. If there is one more vehicle at a home than the number of drivers living there, it can become a business vehicle. That means that all repairs, gas, upkeep, insurance and every expense associated with that vehicle can be deducted as a business expense. You can store it in a garage and don’t need to unload the equipment after a gig. Gig equipment can stay in the vehicle. Then you can deduct the garage expense, taxes, upkeep of the garage. . At our house, the band is the duo of me and my wife Jill Jensen. So as a result we have 3 vehicles per 2 drivers.
Hi Jack. Wow! What a neat idea! I love it. I love the fact that you can keep it in the garage with equipment in tow without having to unload every time. That is a huge pain. Nice! Thanks for sharing.