6 Essential Tips for Managing Your Finances as a Musician
Written by  Daisie Team
Published on 8 min read

Contents

  1. Budget your monthly income and expenses
  2. Track and organize your receipts
  3. Plan for tax time
  4. Save for retirement
  5. Protect your income with insurance
  6. Invest in your music career

Managing finances can feel like a tricky song to learn, especially for those in the music industry. But, just like how you mastered that complex chord progression or nailed that high note, understanding how to manage finances as a musician can be learned too. It all starts with a good rhythm, or in this case, a good budget.

Budget Your Monthly Income and Expenses

First things first: let's talk about budgeting. As a musician, your income might be as unpredictable as the tempo of a jazz improvisation. But, that doesn't mean you can't keep a beat on your budget. Here's how:

Understand Your Income

Income for musicians can come from various sources: gigs, album sales, streaming royalties, merchandise, and sometimes even music lessons. It's important to keep track of all these income streams. So, grab a notebook or use a budgeting app and start recording how much you earn from each source every month. This will give you a clear idea of how much money you're making. You might find that one income source is more lucrative than others—maybe those guitar lessons are worth more than you thought!

Track Your Expenses

Next, let's look at where your money goes. There are obvious expenses like rent, food, and utilities. But as a musician, you also have to consider things like instrument maintenance, studio time, marketing costs, and tour expenses. To manage these costs:

  • Write down every expense, no matter how small. Even that pack of guitar strings counts.
  • Group similar expenses together. For example, group all instrument-related costs (like new strings or drumsticks) under a category called "Instrument Maintenance."
  • Review these expenses at the end of each month. This will help you see where you can cut back and where you might need to spend more.

Create a Monthly Budget

Now that you know your income and expenses, it's time to make a budget. The goal here is to ensure that your income covers all your expenses, with a little left over for savings if possible. So,

  1. Start by subtracting your total monthly expenses from your total monthly income.
  2. If you have money left over, great! That's your savings. If not, take another look at your expenses and see where you can cut back.
  3. Adjust your budget as needed. Remember, a budget is not set in stone. It's a living document that changes as your financial situation changes.

Just like practicing scales or rehearsing a new piece, managing your finances as a musician becomes easier over time. It all starts with understanding your income and expenses, and creating a budget that works for you. So why not start today?

Track and Organize Your Receipts

With your budget set, let's move into a rhythm that might seem a bit offbeat at first — organizing your receipts. Yes, it might sound as thrilling as tuning your instrument, but trust me, it's just as important.

Why Bother With Receipts?

Receipts are your financial footprints. They show where your money has been and what it's been doing. More importantly, they're needed for things like tax deductions and warranty claims. Ever bought a new amp only for it to blow out a week later? Without the receipt, you might be stuck footing the bill for a repair or replacement.

How to Track Receipts

Thankfully, you don't need a filing cabinet or a desk buried under stacks of paper to keep track of your receipts. Here are some simple steps to manage your receipts:

  • Go digital: Use a receipt scanner app on your phone to take pictures of your receipts. These apps can categorize and store your receipts, making them easy to find later.
  • Keep physical copies: For big purchases like instruments or sound equipment, keep the physical receipt. Store these in a safe place, like a dedicated folder or envelope.

Organize Your Receipts

Having all your receipts in one place is good, but organizing them is even better. Here's how:

  1. Group receipts by category: This aligns perfectly with your budget categories. Receipts for guitar strings and drumsticks go in "Instrument Maintenance," for example.
  2. Label clearly: Whether it's a digital file or a physical folder, clear labeling helps you find what you need when you need it.
  3. Regularly review: Set aside a time each month to review your receipts. This not only keeps your system organized, but also helps you stay on top of your spending.

Just like practicing a tricky solo or mastering a new technique, tracking and organizing your receipts takes time and effort. But once you get the hang of it, you'll find it's a key part of managing your finances as a musician. So, ready to hit the right note with your receipts?

Plan for Tax Time

Now that your receipts are singing in harmony, let's shift our tune to another important part of managing your finances as a musician — preparing for tax time. It might feel like hitting a sour note, but it's an unavoidable part of making money from your music.

Why Tax Planning Matters

As a musician, you might have multiple sources of income, from gig payments to album sales and even music lessons. Each of these could have different tax implications. Planning for tax time helps you avoid unpleasant surprises and ensures that you're taking advantage of all possible deductions.

Steps to Prepare for Tax Time

Here's a simple riff to help you get ready for tax season:

  1. Understand your tax obligations: As a self-employed musician, you'll need to pay income tax, but also self-employment tax. Make sure you understand what you owe and when payments are due.
  2. Set aside money for taxes: It's a good idea to set aside a portion of your income for taxes. This way, you won't have to scramble to find the money when tax time rolls around.
  3. Get professional help: Taxes can be complex, especially if you have multiple income streams. A tax professional who understands the music industry can be a valuable ally.

Record Keeping for Tax Purposes

Remember those organized receipts? They're about to play their biggest gig. For tax purposes, you'll need to keep track of:

  • Income: Any money you make from your music, whether it's from playing gigs, selling albums, or teaching lessons.
  • Expenses: Money you spend on your music career, from buying instruments to traveling for gigs. These can often be deducted from your taxable income.

When it comes to managing your finances as a musician, tax time doesn't have to be a flat note. With some planning, you can hit all the right notes and keep your financial tune sounding sweet.

Save for Retirement

Having a successful music career is a dream come true, but what happens when the applause fades? It's never too early — or too late — to start thinking about retirement. Let's talk about how to manage finances as a musician with the future in mind.

Why Saving for Retirement is Important

As a musician, you might not have a traditional 9-to-5 job with a company-sponsored retirement plan. That means it's up to you to make sure your golden years are just as golden as your music career.

Retirement Saving Options for Musicians

There are several ways you can start saving for retirement:

  1. Individual Retirement Accounts (IRAs): You can contribute pre-tax dollars to a traditional IRA, or contribute post-tax dollars to a Roth IRA. Your earnings can grow tax-free until you start making withdrawals.
  2. Simplified Employee Pension (SEP) IRAs: If you're self-employed, a SEP IRA allows you to contribute more than a traditional or Roth IRA.
  3. Solo 401(k): Another option for self-employed musicians, a solo 401(k) lets you save as both an employer and an employee.

How Much to Save

How much should you be saving for retirement? That depends on your age, your income, and your retirement goals. As a rule of thumb, aim to save 10-15% of your income for retirement. But remember, any amount you save now is better than not saving at all.

Managing finances as a musician isn't just about the here and now — it's about making sure you're still hitting the high notes even when you're not on stage anymore. Start saving for retirement today, and you'll be writing a love song to your future self.

Protect Your Income with Insurance

When you're a musician, your income isn't just about the notes you play — it's about your ability to play them. That's why it's important to protect your income with insurance. Let's dive into how to manage finances as a musician by safeguarding your most valuable asset: your talent.

Why Insurance is a Must for Musicians

Your fingers strumming a guitar, your voice hitting those high notes, your feet moving on the dance floor — these skills are your bread and butter. But what happens if you get injured or fall ill? Insurance can provide a safety net, helping to cover your expenses and protect your income if you're unable to perform.

Types of Insurance for Musicians

There are a few different types of insurance that can be beneficial for musicians:

  1. Health Insurance: Covers medical expenses related to illnesses or injuries.
  2. Disability Insurance: Provides a portion of your income if you're unable to work due to a disability.
  3. Instrument Insurance: Covers the cost of repairing or replacing your instruments if they're damaged, lost, or stolen.

Choosing the Right Insurance

When choosing insurance, consider your specific needs. What risks are you most likely to face? What aspects of your income need the most protection? Answering these questions can help you choose the right insurance policies and coverage amounts.

It's easy to get lost in the rhythm of your music career, but don't forget to protect your income with insurance. By doing so, you're not just managing your finances — you're securing your future performances, too.

Invest in Your Music Career

As a musician, you're not just an artist — you're also a business. Like any business, investment is key to growth. So, how can you manage finances as a musician while still investing in your career? Let's strike the right chord and find out.

Education and Training

Investing in your music career isn't just about buying the best equipment. It's also about investing in yourself. Keep your skills sharp with music lessons, workshops, and training. It's like tuning your instrument — it keeps you in harmony with the changing music scene.

Quality Instruments and Equipment

Just as a chef needs quality tools to cook a delicious meal, musicians need quality instruments to create beautiful music. Invest in high-quality instruments and equipment that can help you perform at your best. This might mean a more expensive guitar, a better microphone, or even professional audio software.

Marketing and Promotion

Word of mouth is great, but in the digital age, marketing and promotion can take your music to the next level. Consider investing in a professional website, social media advertising, or even hiring a publicist. These investments can help you reach a wider audience and bring in more income.

Remember, investing in your music career isn't a one-time thing. It's an ongoing process. But with careful financial management, you can make smart investments that pay off in the long term. So, tune up your finances, and let your music career hit all the right notes.

If you found the "6 Essential Tips for Managing Your Finances as a Musician" blog post helpful, you should definitely check out Kelsee Thomas' workshop, 'A Freelance Artist's Guide At Making Finances Make Sense.' This workshop will provide you with even more valuable insights and advice on how to manage your finances as a freelance artist, including musicians like yourself.