The Independent Musician’s Guide to Not Going Broke

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Musicians, producers and engineers often face tough career propositions. Here’s how to avoid losing your shirt – in good times and in bad. With a little bit of intelligent planning, you might even come out ahead.

If you’re anything like the average American, chances are that you have a credit card with about $7,000 in unpaid debt, and if you’re lucky, you might have about $6,000 in your savings account.

There’s also a 76% chance that you’re currently living paycheck-to-paycheck, and that if you lost all your income tomorrow, you wouldn’t have enough money saved to cover your bills for 6 months.

But wait, it gets better: If you went to college, odds are that you’re carrying almost $30,000 in student loan debt, and there’s about a 1-in-8 chance that you owe more than $50,000.

Image courtesy of Flickr user _ET

Image courtesy of Flickr user _ET

And don’t even get me started on retirement.

When it comes to planning for the future, there’s about an 80% chance that you aren’t on track to save enough money to retire comfortably by the age of 65, and a 45% chance that you haven’t saved any money for retirement at all. Hell, there’s even a 56% chance that you have no clue how much money you’ll need to set aside if you do want to retire someday.

Here’s a hint: It’s a lot more than you think.

If you’re currently 30 years old, and you want to retire at the age of 67 with something around a median salary, you’ll need to have roughly $2 million in the bank.

That’s right: By the time you retire, you will need to be a multi-millionaire, just to get by with a basic middle-class salary. That’s how the compounding effects of inflation work.

Musicians, engineers, and other creative professionals, unfortunately, are likely to be even worse off and have less of a handle on personal finance when compared to peers in other fields.

By now, most of us have probably heard that old joke: Q: “What does a musician do when he wins a million dollars?” A: “Keeps playing gigs until all the money runs out.”

But it doesn’t have to be that way.

Now That I Have Your Attention, Here’s the Bright Side

Now that I’ve scared the bejesus out of you for my own amusement (and your own damn good) let me assure you that it’s not too late to do something about it.

Thankfully, mastering your finances doesn’t necessarily mean giving up on music. If anything, it may be the only thing that can keep you in it.

A few years ago, when I was approaching 30, I had a fairly “cool” job doing audio production work, but I was a lot like the average American when it came to personal finances: I had credit card debt, negligible savings, no real retirement account to speak of, and not enough income to sustainably support even the modest lifestyle I was living. Basically, I was living the much-maligned “millennial” lifestyle.

Today, all that has changed. I am by no means wealthy. But I’m debt free, on track to save up for both a retirement and a home, and if I lost every one of my sources of income tomorrow, I’d kinda be okay. (For a little while anyway.) And none of it required giving up on the things I care about most.

The freedom you get – both creatively and economically – from being in that kind of position is something that I just can’t put a pricetag on.

When you get your finances together, you can finally afford to say “yes” to the things that are important to you and “no” to the things that aren’t. You can set aside time to figure out how to perfect your craft, and how to make it economically sustainable. And at the risk of sounding like some dopey self-help author: you can do it too.

Here’s the thing: It’s not even that hard to do in the long run. But it does take discipline and some real effort – especially at first.

Although there’s a pretty clear path to getting your act together with your personal finances, most people don’t start on it nearly soon enough. And those that do almost inevitably end up kicking themselves for not getting started sooner.

Don’t worry: If you’re not on the path already, no one is blaming you for not knowing your way around this stuff. For some reason or another, they just don’t teach this stuff in high school or in college. (And if they did, who knows if we would have listened.)

But whether you’re 25 or 39, it’s time to start thinking about this stuff, now. Because the sooner you start, the less hard you’ll have to think about it. And the more time you can spend making great art instead.

Where to Start

As dry and boring and un-punk-rock as the words “personal finance” sound, mastering your own pocketbook is probably one of the top skills that any musician, engineer, producer or creative professional needs to work successfully in today’s industry.

By now, it should be pretty clear that record labels aren’t just handing out huge advances. YouTube, arguably the most popular music discovery engine in the world, isn’t exactly a gold mine either. And even if it were, they’re not really “hiring musicians” to make all those videos, because that’s kind of “not how the world works.”

Creative types these days tend to be small business owners, in effect. And if you can’t handle your own personal balance sheet, how the hell do you ever expect to run a creative business?

If you’re serious about making a sustainable career in music or any other creative field, handling your money effectively is going to take four steps: 1) Setting up an automated investment plan, 2) Paying down debt, 3) Getting realistic about your budget, and 4) Making more money.

All that is pretty easy to say, and a little harder to do. But it can be done. Here’s how.

Step #1: Set Up Automated Investments

Some of the best money advice I ever got was “Whenever you get a paycheck, use it to pay yourself first.”

Meaning: Every time you earn money, first take some of that money and save it in an investment account.

Better yet, make this process automatic. Otherwise, it’s almost impossible to keep up.

If you leave that investment untouched, whatever money you save this way can and will double itself many times over throughout the course of your life.

Better yet, if that investment is happening automatically, before you get a chance to even think about spending it, you won’t even miss it.

Financial surveys show people have an uncanny knack for spending almost exactly what they make each month, no matter how much they earn. So learn from psychology, hack your own brain, and get started with automated investments, immediately.

Here’s some good news: You don’t have to be some kind of Warren Buffet-style investing genius to make your savings double its value many times over in the long run. It doesn’t take scammy “get rich quick” schemes either.

All that this kind of return-on-investment really requires is putting your money in low-cost index funds on a regular schedule, and then not freaking out when the market dips and dives and does loopity-loops.

(Yeah, the market will do that. Get used to it. That’s just how it does. It’s been doing it for a couple hundred years now, and shows no signs of stopping just because it makes people uncomfortable.)

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  • mandalaeyes

    All really good advice–I’m excited to play around with Mint–except that I think if you’ve accumulated ultra-high-interest debt (like on a credit card) that needs to be the #1 priority above all other things, even above starting a retirement account. If you don’t pay off your credit card debt at something like 18% interest, but you’re saving money in an index fund or IRA at 8%, you’ll be losing more money in interest to the credit companies than you’ll be gaining from the investments during that time. So it’s actually a better “investment” to get rid of that debt ASAP. Now a car loan at 4% would be a different story because you could be earning more interest on an investment than you would be losing on the loan. But you get the point.

  • TrustMeI’mAScientist

    Technically true mandala! But I put investing first anyway, for two very specific reasons:

    1 ) It’s a longer road, and the sooner you start the better. And:

    2 ) For a lot of people, there’s a real psychological advantage to seeing your money grow. It can be hard to keep at this when you’re faced with all of the pain and none of the reward.

    I find that when folks start by investing *and* paying down debt, they’re much more likely to keep at it than if they’re just paying down debt alone.

    (Plus: You may have the option of moving any high-interest credit card debt to a lower or zero interest rate account for a while — or at least consolidating all your debt at a slightly better rate.)

    Thanks for weighing in,


  • mandalaeyes

    Ah, I thought you might have considered the psychological advantage. Very valid points Justin. Thanks for your response!

  • headphonomenon

    I am grateful to my father for explaining things almost exactly the same ways very early on. I see now that that was his way of supporting my decision to have a ‘creative’ career – which was otherwise foreign to him.

    All recording arts students should be required to pass a test on this info before getting their certificates/diplomas. It is amazing how few people have been really confronted with info like this. Good job!

  • ladyocti

    Thanks for the article. When you get going the way you described things really do work! And I like what you said about “your path taking you to the places you always wanted to visit.” That’s pretty much it…..

  • Rabbi Goddard

    Great article. I’m glad I thought to do most of this stuff well before I read this post. This did however motivate me to set up a roth IRA. Thanks justin

  • Joel Douek

    Great article!

  • Lindsey Walker

    I made it to the end! I didn’t even abandon this article for TMZ!

    But honestly, thank you Justin for a great ‘kick-in-the-pants’ article. I think it’s time for me to take this whole ‘money thing’ seriously and now I feel a lot more prepared. Thanks again!

  • Tim

    Fantastic article. I have heard excellent things about, but have been too happy with my current budgeting system to move over. I recommend You Need A Budget as a great option for managing finances. For musicians and freelancers who do not always have predictable income streams, the YNAB system is helpful because it prevents you from spending money you don’t have.

  • Regan Music

    Thanks, Person. Very insightful, I upped my savings from 3% to 8% today, because when looking over it, I can easily do that, and I can’t seriously give a reason why I can’t do that. So, sounds great. Thanks for pointing me to those calculators too, they’re great!

  • Roland

    Great article very helpful. I follow Ramit Sethi and have read his book, but the truth is Ramit did not build his wealth by following his own book. He did it by creating his online businesses. The book that needs to be addressed here is Rich Dad Poor Dad by Robert Kiyosaki. Musicians need to learn how to invest in businesses that can create “passive income” not “earned income”. Don’t know the difference? Read Kiyosakis book.

    I want to be able to turn down a gig and not worry about my financial situation, because passive income is coming in every month and covers my basic needs and then some. This article is great for showing how to manage finances but creating wealth I don’t believe this article does justice. I want to create wealth like the 1% not the 99%.

    The 1% invest in their education, businesses and the stock market. But they don’t invest in the stock market like this article shows (the 99%) they invest like the 1% but that’s another lesson. Just watch Shark Tank, and the The Profit. These billionaires invest in businesses to build passive income not earned income.

    Musicians need to learn how to create passive income this is how the 1% think. And if the 1% succeed in that manner then count me in.

  • nice