Introduction
Last week I introduced the 6 Key Steps to Financial Success for Independent Musicians. This week we’ll dive into the first and most important step: Budgeting.
Being an independent musician is an exciting and rewarding journey. However, navigating the unpredictable world of music can be challenging, especially when it comes to managing your finances.
The key to achieving financial success as a musician lies in creating a well-structured budget that aligns with your income and expenses. In this blog post, we will delve into the essential steps of budgeting for musicians and introduce six handpicked budgeting tools that can simplify the process and allow you to focus on what you do best – creating music.
Why is budgeting the first and most important step?
There are many reasons why budgeting is important, but to put it simply – if you don’t budget, it’s a lot easier to run out of money and a lot harder to succeed.
There are many examples of very successful musicians who went broke, despite having millions of dollars. Read ahead if you don’t want to turn out like them.
What is a budget and how do I create one?
A budget is a plan that outlines how much money you expect to bring in (income), and how much you expect to spend (expenses).
As an independent musician, you might have a couple of different types of budgets:
A personal budget, that outlines your regular income and expenses, usually on a monthly basis.
A project budget, that outlines how much money you expect to earn and spend for a specific project, such as a tour.
For personal budgeting, I usually recommend using one of the apps outlined below. They make things a lot easier with features such as automatic bank transaction imports, bill reductions, and educational tools.
Project budgeting can be a bit trickier – there are more moving parts at play and very few (if any) apps to help. You may want to do these budgets manually – by hand, on Microsoft Word, or if you’re feeling gutsy, using Microsoft Excel. I’ll discuss this a little bit more at the end of this blog.
Regardless of the type of budget you are making, there are three main steps to budgeting:
List your sources of income. Ex. Music deals, licensing, shows, etc. Then estimate how much money you will bring in from each source. Remember to be conservative.
List your expenses. Ex. Travel, groceries, restaurants, rent, etc. Estimate how much each category of expense will be in the coming months. Again, be conservative.
Subtract your income from your expenses and make sure you have money left over. If you don’t, you’ll need to change something. We’ll discuss this in detail next week.
Recommended Personal Budgeting Apps
Thanks to recent technological advancements, we now have access to a huge number of budgeting tools that can simplify our monthly budget and save time. Here are six commonly used budgeting tools. You probably only need one, but each has its pros and cons:
Mint
Mint is a user-friendly app that syncs with your bank accounts and credit cards to provide a comprehensive overview of your finances. It tracks spending, sets budget goals, and sends alerts for upcoming bills.
Pros
Automatically syncs your expenses and revenue from your bank and credit cards(s)
Free to use
Cons
In app advertisements for things that you probably don’t need
Sometimes it gets the expense categories wrong
Who is it for?
The musician who wants a free budgeting app that works pretty well but doesn’t push or educate them to better manage their finances.
YNAB (You Need a Budget)
YNAB is a powerful budgeting tool that emphasizes proactive financial planning. It encourages users to assign every dollar a specific job, helping you take full control of your money.
Pros
Automatically syncs your expenses and revenue from your bank and credit cards(s)
Their four-step money management plan helps to ‘push’ you in the right direction to get your finances in order.
Many personal finance professionals recommend it as the top budgeting app.
Teaches you how to manage your finances rather than just doing it for you.
Cons
Free for the first 34 days. After that it’s either $14.99/month or $99/year.
Takes a little more effort to learn.
Who’s it for?
The musician who wants to take active control of their money and doesn’t mind taking some time to do it.
EveryDollar
Created by financial expert Dave Ramsey, EveryDollar is designed to guide users through the process of creating a zero-based budget, where income minus expenses equals zero. This method ensures every dollar is accounted for.
Pros
Excellent budgeting tool with a focus on paying off debt
Cons
There is a limited free version. The premium version is $9.99/month or $99.99/year.
No investment tracking
Upsells for Dave Ramsey’s courses
Who is it for?
The musician who really wants to take some time to learn and may need the tool to help them get out of debt.
Empower Personal Wealth
Empower is an all-in-one financial app that offers budgeting, saving, and investing features. It also provides personalized financial recommendations to help you achieve your goals.
Pros
Free to use
You can sync your bank and credit card accounts
Offers wealth management, education, and retirement tools
Cons
Not as helpful for budgeting as some of the other options here
Who is it for?
The musician who has money to save and invest and may be actively planning for retirement.
Goodbudget
Goodbudget follows the envelope budgeting system, where users allocate money to specific virtual envelopes for different expenses. This approach promotes conscious spending and prevents overspending.
Pros
Uses a similar method to YNAB to help you manage your money, which is proven to be very effective
Cons
Limited free version. Paid version is $60/month or $7/year.
Doesn’t sync directly to your bank or credit cards, but you can upload transaction reports from your bank
Who is it for?
The musician who likes YNAB but wants to spend a little less money and do a little more themselves.
Rocket Money
Rocket Money is a budgeting tool with a built-in bill-reducing tool. It helps manage variable income and irregular expenses effectively.
Pros
Has a built-in budgeting tool that is pretty good
Identifies subscriptions that you might not need anymore
Will negotiate your bills for you
Cons
Very limited customer support
Limited features in free version. Premium is $3 to $12 per month
Who is it for?
The musician who is trying to reduce their expenses.
Key Tips for Project Budgeting Your Tours
There are a couple of key points when budgeting for tours that musicians should always keep in mind.
Firstly, in recent years, travel expenses have begun significantly eating away at musicians’ livelihood – to the point where the cost of travelling can exceed the money made from shows. We’ll discuss ways to manage this next week.
Secondly, if you are travelling cross-border, don’t forget to convert currencies. For example, if you’re travelling from US to Canada and being paid in CAD, go on google, type in “convert $x from USD to CAD” and add the converted amount to your budget. Currency conversion impacts can be bigger than you would expect – several of Canada’s largest music festivals have failed due to the low Canadian dollar.
Conclusion
Creating and sticking to a budget is the first key step toward achieving financial success as an independent musician. By carefully tracking your income and expenses, and by using efficient budgeting tools, you can gain control over your finances and set yourself up for long-term success. Remember to be adaptable and adjust as your career evolves and your financial situation changes.
Next week, we'll delve a little deeper into budgeting and understand how to best manage expenses. If you regularly find yourself on the road with rising travel expenses (ew inflation) and not sure what to do, next week’s blog is for you.
Jason Kowalczyk, HBA, CPA, CA, CFE - Co-founder, Staccato
Jason is a trusted advisor to musicians seeking to turn their passion into a successful business.
Jason graduated with distinction from the Ivey Business School and spent the last decade developing strong business acumen throughout the accounting, finance and regulatory spaces. Jason leverages this business experience to provide practical insights and guidance to help musicians navigate the industry and achieve their goals.
