The beginning of the year is the perfect time to be thinking about financial planning, tracking your cash flow, setting up systems that take advantage of tax deductions and making sure you’re saving for retirement. These might not be sexy subject but it is crucial for musicians not to ignore them.
In this episode, Lindy Venustus of Create Financial Planning talks about financial planning for creatives and musicians. Lindy’s passion around being accessible and available to help people. She creates financial planning to be a resource to people where they are. She is a fee-only advisor and doesn’t get commissions. She is available on a planning basis to help people where they are.
Something I like to talk about is how we think money is evil. We’re mad at what it’s done to people that we know or we’re mad at things we don’t understand. There are so many reasons and we put all these things on money, but money itself is a unit of exchange. We put all this heaviness around this thing and all it is anything we’re using to exchange. There are a lot of musicians that go through a feast or famine experience.
One thing I would tell people as a business owner myself is to always be in that gig acquisition mindset. Even when you are super busy, do set aside some time to be working on securing those next gigs. I know sometimes you feel like you have so much going on, you can’t even think about it, but it’s important to do that. As far as the feast and famine of the cashflow coming in, I like to think of it because it’s fun to be fancy once in a while, as a three-tier tower of champagne glasses. The top tier is your necessity and the rest trickles down. First, we’re going to prioritize our necessities, food, shelter, utilities, health and insurance. The second tier is where you pay debt and save. The base tier is where you can spread out more, enjoy that variable or non-essential lifestyle.
Lindy has made a money flow sheet to help you determine what your necessities are. It can be updated monthly. In addition to listing all of your expenses, list all of your income. By doing this, you’ll start to see trends if they are there and be able to see everything earned for the month and the year in one place versus having it be cluttered up in a checking account or on a credit card. As you come to know your necessities and your income, it would be nice if there was a rule of thumb that I could give you an ideal to shoot for.
The first category of your necessities is trying to keep that at 50%. For the second category of saving, I’d say try to save at least 10% for yourself with a goal of 20%. I have met some super savers who are able to consistently save 25% of their income. Remember the IRS, if you are self-employed, you’ll owe 15.3% for self-employment taxes in addition to state and federal.
You also need to have a buffer account. Remember why you have the savings. Is it there as a buffer for those slow months or for the future goal like buying a house? Keeping in mind that it will make it easier to let it grow and not spend it on online shopping or at happy hour or on something spontaneous. This is a good way to move forward if you don’t have an immediate short-term growth goal that will require a lot of cash like a home down payment, for example. The last thing we just mentioned, wealth. Being able to consistently live within your means and have some money left over every month that comes from prosperity.
A quick note, don’t feel entitled to always live your best life. Pay your future self. Imagine a three-year-old running around with your wallet. That is what is happening right now if you’re not saving for the future. Plan to take care of yourself when you’re older, then you can act like a crazy kid again. When your basic needs are met and your emergency fund is full, then treat yourself. Trickle-down economics with champagne.
Many musicians have multiple gigs and side hustles. Some tips for navigating keeping track of money coming in from multiple sources would be to use a cashflow tracking system. Lindy has built her cashflow worksheet, which makes the world simple for me as a visual person. She has put in a tab if you have multiple gigs. You can make all of those sources and figure out where your money’s coming in this month and how much to expect this month from each of your gigs. You could keep track of that for the whole year. In addition to that, it has a tab where you can put in what your business expenses are and your personal expenses that are fixed, and then your variable. It’s based on that 50%, 30%, 20% budget that I spoke about or cashflow system. There’s a page called The Money Map where it visually shows you how much you have coming in, what your fixed expenses are, what your personal expenses in your business and then what’s leftover. From there, I like to use a $0 planning. The goal is that there is money left over and to have your money work for you, instead of you working for money. There’s going to be hopefully a number leftover and we’re going to bring that down to zero by telling it where to go.
Lindy advises us, “You deserve to work with your values and the reasons that drive you. That, my friend, is worth a champagne toast right there. Lastly, I was hoping to give you a simple rule, save this much, spend this much, put it here, but the truth is each one of us has a completely different business and life. The simple rule is you are unique. You deserve unique advice tailored to your life and your business. I’m not saying you have to work with me but please do work with a professional planner like myself, as well as a CPA, a bookkeeper and an attorney.”
This episode was previously published on the Profitable Musician Show.
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