Financial Planning For Musicians: 6 Steps to Financial Security

Now that you have worked on your financial literacy chops (see: How To Take Charge Of Your Finances As A Musician), let’s put this information together and make a financial plan. This is a key stop that takes the amorphous concept of “How can I make a living as a musician?” and breaks it down into manageable action steps. Not only is this doable but it is also empowering since it helps you to use the mindset and skill set of a business owner to plan out a sustainable career.

So let’s take a look at the process in greater detail.

1. Set career goals based on best assumptions

Good financial planning starts by examining your career goals and figuring out how to generate the income to make those goals happen.

Start by setting the right kind of career goal—goals that are both inspiring and doable—so that you will be motivated to make them happen!

Perhaps it is a combination of freelancing, teaching and running your own concert series. As we learned last time, most musicians have multiple revenue

This requires you to make assumptions about what you are doing. You make your best guess based on those assumptions and then make corrections to your plan as reality unfolds.

Be sure to include an honest assessment of your tolerance for risk and uncertainty. In today’s music world, a full-time salaried position with benefits is the exception rather than the rule. So how do feel about managing uncertainty? If security is important to you, honor your need for security and look for a steady source of work.

2. Set Your Annual Income Goal

With your career goals in front of you and your assumptions at hand, you are ready to set your annual income goal so that you know how much you need to earn.

First, make a budget that reflects your living and career-related expenses for a fixed period of time (a month, a quarter or a year) based on past experience and best estimates. Your goal is to earn more than you spend and to live within your means by carefully tracking your income and expenses on a regular basis.

A budget is not a long-term exercise but rather a tool to help you manage your financial position in the immediate future. And a budget is based on a lot of assumptions that you need to be aware of at all times, including how you will generate your revenues and your life-style requirements.

Be sure to factor in where you will be living since this makes a big difference in your expenses. Rents in New Haven or the Midwest are much lower than rent in New York City. And living in a city where you do not have to have a care versus living in an area where a car is a necessity will also influence your expenses. For a cost-of-living calculator, consult this handy tool!

Now it’s time to set your annual income goal:

Add up your expenses from your annual budget. Be sure to include provisions for savings, taxes, and insurance. This is the number you need to earn in order to support your lifestyle and secure your future.

3. Select your revenue streams

For the next step, decide which revenue streams you can tap into in order to support yourself as a musician.

Musicians have a lot of options for making money! Select the revenue streams that align best with your abilities and skill sets. If there is something that tempts you but you do not know how to achieve it, set a goal!

Examples of revenue streams for musicians include:

  • Performance income from a wide variety of sources including orchestra, chamber music, solo, rock concerts, accompanying, session work, choir, opera or other collaborations and ensembles, in venues ranging from concerts halls, churches, cool new venues, house concerts, weddings, or festivals
  • Conducting
  • Composing and arranging
  • Teaching, both a private studio or your own students, a salary from institutional teaching or work as a teaching artist
  • Expert Services such as workshops and master classes
  • Administrative work
  • Business income
  • Merchandising

Next, figure out how much money you can make from each of your revenue streams. If you are already deriving income from performing or teaching, you know how much you can earn per gig or how much you can charge for an hour-long lesson. In addition, Berklee College of Music has assembled an excellent handout on the salary ranges for musicians. You can also do informal
research by asking your friends how much they make per gig.

4. Calculate your annual income

You are now ready to calculate your annual income.

For each revenue stream, identify the charge per service, the number of services per month and the number of months per year to derive your annual income from this revenue stream. And be sure to be realistic about how often you can perform or how many students you can handle!

Let’s say that you currently sub for your local orchestra and each time, you earn $100. On average, you sub twice a month and you perform 8 months/year. Next year, you will be out of school and you assume that you will have more time to perform so that you will give 4 performances a month. Your income from orchestra performances is calculated as follows:

$100(charge per service) x 4 (services per month) x 8 (months per year) =$3,200

Do this for each of your revenue streams and add up all of your projected revenue streams.

If the total of all of your revenue streams falls short of your annual expenses, think about other ways to derive income. Can you add more students? Charge more per hour? Find new performance opportunities? Now you are thinking like an entrepreneur!

5. Decide on your strategies and take action

Now it is time to take action. How are you going to generate these revenues?

For example, if your goal is to be a freelance musician in New York City, what strategies can you employ to find performance opportunities?

Here are a few ideas:

  • Network with friends and acquaintances who are already freelancing in NYC and let them know of your interest and availability
  • Ask your teachers and mentors for suggestions of performance opportunities in NYC
  • Take a lesson with a prominent NYC-based musician who performs a lot
  • Circulate your CD to presenters
  • Go to concerts of groups whom you would like to play with and meet the performers afterwards
  • Meet contractors
  • Take auditions

Then, take action each week. I define an action as anything you can write down on a list or in your calendar and check off when you complete it.

Here’s how it works:

Set a goal around for strategy. If you goal is to expand your network, consider the following:

  • How many friends or acquaintances will you connect with over the next 3 months?
  • Whom will you contact?
  • How will you make contact with him or her (e.g., email, phone, Facebook, in-person)?
  • By when will you make contact with each person?
  • How many calls or emails will you send this week?
  • Whom will you call or email or meet with this week?
  • Write down an action in your calendar and keep moving forward!

6. Review and update your plan

The final step is to review your financial plan on a regular basis to chart your progress.

Remember how your plan is based on a lot of assumptions? Be sure to check in every month on how well are those assumptions playing out. Did you overestimate the number of gigs per month? If so, what can you do to increase the number? What else can you do to make up the shortfall in income so that you stay on track?

The idea is to set short-term goals that enable you to get closer to your career goals, have the experience, evaluate how you enjoy that and how successful you are and rechart your course if you do not meet your goals because your assumptions did not turn out the way your thought. And that’s okay. Because you know the underlying assumptions and the minute those assumptions stop being true, you can course correct.

By following this process, you can see how your career path plays out financially and make the necessary adjustments to assure that you are on track to supporting yourself. And you should feel a lot better knowing that with a realistic plan and strategies for making it work, you can begin to manage the uncertainty of the life of a musician.

Bottom line:

Not only is the process of making a financial plan doable, but also it is also critical to being a successful entrepreneur. So put on your entrepreneurial hat and make your financial plan today!