Managing The Unpredictable: 5 Steps to Help Manage Your Freelance Finances

If you are a freelance musician, you undoubtedly love the fact that you are making a living from your passion, together with freedom that comes along with being in charge of your own life. And yet, that life is fraught with uncertainty, particularly related to your finances:

Can I really make money as a freelancer?

How can I make money from my art?

How can I make a plan in light of all the unpredictability of my freelance revenues?

9677861743 c7039345de mThese questions were front and center at a recent workshop that I did at Yale for drama and music students, as well as the topic of one of the career coaching groups that I run at Yale. Many of our artists started out with a certain degree of trepidation when approaching their finances. However, they realized that being committed to the life of an artist is a strong motivation to learn the skill of financial management, which involves becoming financially literateand then organizing the financial information into a plan.

Here are 5 steps to greater financial freedom as a freelance musician:

1. Think Expansively about your Revenues

2. Have Multiple Revenue streams

3. Make Budget

4. Make a Plan

5. Check in on your assumptions regularly and course correct as needed

Before we examine these 5 steps, it is important to be honest with yourself about your ability to manage the freelance lifestyle:

  • How well do you tolerate uncertainty?
  • How well can you manage without a full time job with benefits?
  • How well do you manage your time to stay on top of your commitments? Be sure to check out these time management tips to help you manage your time commitments while you manage your finances.

1. Think Expansively about Revenue Streams

In our rapidly changing world, traditional opportunities are very competitive and hard to come by. So here are 2 important principles if you are considering a career in the arts.

First, think expansively about your revenues streams.

You need to go beyond the traditional marquis jobs. Yes, Broadway and the Metropolitan Opera and Carnegie Hall are exciting and enticing. They are also REALLY hard to come by. And, there are more ways to earn a living than playing in a traditional orchestra or appearing on Broadway. In fact, the Future of Music Coalition lists 40 revenue sources for musicians!

So use your creativity to consider different ways of earning money:

A few salient points:

  1. Think expansively about where to perform and consider unusual performance venues.
  2. Teach either institutionally or by starting a private studio.
  3. Give workshops and position yourself as an expert who will be hired to give speeches and make presentations.
  4. Look for ways to earn passive income: royalties, residuals, income from websites, sales of merchandise.
  5. Create a business.
  6. Get a day job to provide a steady source of income especially when you are first starting out. Babysitting and tutoring are good options that enable you to make money and provide you with flexibility while you establish yourself as a professional artist.
  7. Consider a job in arts administration, which is a good way to stay in the arts and learn useful skills like fundraising, grant writing and general office skills.

2. Plan on Multiple Revenue Streams

The second important point about generating revenues as a performing artist is to plan on multiple sources of revenues. The reality for performing artists is that few rely on one source of employment and the majority of musicians juggle multiple roles.
Therefore, plant a lot of seeds in a lot of different “fields” and diversify your sources of work and revenues. In the words of Josh Quillen, a member of the successful percussion quartet So Percussion, be “too small to fail” so that you do not have to rely on one income source.

3. Budget Wisely

A budget is a tool that lays out your expenses and your income 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.

For a sample budget, click here.

Be sure to keep in mind the following expenses:

Fixed expenses (e.g., rent, cellphone, internet, insurance premiums)

  • Do not change over time.
  • Do not depend upon your consumption. Once you commit to them, you pay the expenses.

Variable expenses (e.g., clothing, food, entertainment, transportation)

  • Change depending on your choices around consumption

Career-Related Expenses (e.g., instrument repair and maintenance, headshots, business travel)

  • As a freelancer, you can deduct these expenses from your taxes so be sure to keep track of these and keep good records.

Periodic Expenses
(e.g., union dues, association and other membership fees)

  • Include these in your monthly budget by figuring out the monthly cost

Since so many musicians are self-employed and have income that fluctuates, it is imperative that you start saving now!
If you start saving small amounts now, those savings can accumulate very nicely over your lifetime thanks to compounded interest. Even though interest is at an historic low right now, it still makes sense to start saving now.

Emotional Spending
Last but not least, if you are devoted to your art, you will need to live leanly so avoid the temptation of “emotional” spending. Buying that latest iPhone won’t get you a job and just think how many gigs you need to have in order to earn all that money And avoid credit card debt which can put you in the hole.

For help with controlling your emotional spending, check out these helpful tips.

4. Make a financial plan based on your best assumptions

Now that you know some of the basics of financial literacy, it is time to make a financial plan based on your best assumptions of what your expenses are and how you can generate revenue to cover those expenses.

Follow these steps to create your financial plan:

Write down your annual income goal
Add up your expenses from your annual budget and commit to the amount that you need to earn in order to cover all of your expenses, including savings, taxes, and insurance.

Select your revenue streams:
A freelance musician might have the following revenue sources:

  • Performance, including the types of performing you plan on (orchestra, chamber, solo, rock, other ensemble) and the different venues where you can reasonably expect to perform
  • Teaching, including private students as well as salary from institutional teaching
  • Expert Services such as workshops and masterclasses,
  • Administrative work
  • Business income

Calculate your income for each revenue stream
Start with performing:

Let’s say you currently sub twice a month for your local orchestra and each time, you earn $75. On average, you perform 6 months/year with this orchestra. Next year, you predict that you will have more time to perform with this particular orchestra so that you will have 4 services per month. Your income from performances with this particular orchestra is calculated as follows:

$75(charge per service) x 4 (services per month) x 6(months per year) =$1800

Do this for each source of performances.

For teaching, you currently have 3 private students once a week or 12 lessons a month for 8 months and charge $50/hour. Next year, you are aiming for 5 weekly private students or 20 private lessons a month for 8 months and you plan to raise your rates to $60/hour. Your income from private teaching would be calculated as follows:

$60(charge per service) x 20 (services per month) x 8(months per year) =$9600

Make this calculation for each of your revenue streams.

Add up all the income from your various revenue sources to derive your annual income
If your income does not cover your expenses, think about how to generate new sources of income. Otherwise, how can you cut your expenses?

Come up with strategies for generating your income and take action
Once you have laid out your plan, think about how you are going to generate these revenues.

For orchestra gigs, your strategies might include meeting contractors, taking auditions, networking with members of local orchestras, attending concerts to meet fellow performers.

For students, your strategies might include contacting parents associations of local schools, networking with band directors or youth orchestra directors or other music teachers who might be a good source of referrals.

Pick your top strategies and then, each week, commit to taking a few actions that will help you achieve your goal. How many friends will you network with? When and where? Write down an action in your calendar and keep moving forward!

5. Review and update your plan

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

By following this process, you can see how your career path plays out financially. 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 correct your course of action and make sure that your plan actually works.

By following these simple steps, 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 being a freelancer.