Money and the arts have butted heads for a long time. Some artists and musicians feel like making money successfully is a sign of selling out. In reality, making money and managing it well prepares you to more quickly and efficiently achieve your creative dreams. What does it look like to manage your irregular show income so you can invest for the future? Here are some tips to make the most of the money you are spending and saving for your career.
Use a spreadsheet to track your income and where it goes. Remember: spreadsheets are your friend. While these may look intimidating and sound boring, they are important tools to help track your income. Often times, your income will be entirely dependant on the time of the year, how often you gig, when you release an album, and a huge list of other variables. By utilizing a spreadsheet to help you plan, however, your income becomes more predictable. For instance, let’s say your average monthly income is $3,000. When you dig deeper, you may notice that you bring in $4,500 during summer months when you play more gigs. With that information, you know to set aside some of that extra summer money for the off-months when income may only be $1,500 per month. Click here for a sample monthly income/expense spreadsheet.
Budget. If you don’t plan your budget out in advance, you will likely overspend. Based on past projects, break down costs in categories. For example, if you are planning a budget for your next album, list the cost of the studio, equipment purchases, session musician fees, album art and/or photography, and producer and engineer fees. By laying out all of these costs before you step into the studio, you will have a better idea of how much money you will need to complete the project.
Create a separate bank account for your music income. It’s important to know that while your music is important, you still need to treat it as a business. People in your band or who you work with should be paid in an organized fashion for their time and effort. Have a set time to pay your band members or yourself, whether it’s once a week, every other week, or once a month. Opening an account is fairly simple. Click here to read an article about how to open a business bank account.
Save! Get in the habit of paying off your expenses and then saving a portion of your profit from each project. Jennifer Lane is a Principal Certified Public Accountant for Vaden Group, an Elliott Davis Decosimo Practice, an entertainment industry accounting firm. The advice she has for music industry professionals is, “Save a percentage of your earnings now so you have something put away and pay your taxes as you go.” Mike Vaden, one of the industry’s top entertainment accountants warns, “Don’t go into debt or spend money now based on the dream of earning a large sum of money you think your song or career will bring you in the future.” The music industry is a tough business. You want to avoid going into debt for the dream of greener pastures. It is important to set aside a portion of your income so you can save money for future projects and pay taxes each year. Depending on if you are a solo artist or part of a band, you will have to file taxes as either a sole proprietor or as both an individual and member of the group.
Elaine Luttrull is also a CPA with a passion for the arts. She has developed business and entrepreneurial curriculum for institutions as varied as St. Lawrence University, the Columbus College of Art and Design, and Ohio State University. She had this to say about being a financially responsible musician: “Achieving financial stability doesn’t make anyone less of an artist or performer. Ultimately, financial freedom makes it easier for artists to choose the projects that interest them most, which in turn fulfills them creatively.” Lerner, Michelle. Money Management for Artists: How to Do Well Without Selling Out. Achieving economic stability and success sounds daunting, but is easy to attain if you save smartly, keep track of your expenditures, and make sure to treat your art as your passion and personal business venture. Both need investment in order to flourish and thrive.