Finance Friday!!! AKA Finance tips for musicians

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Finance tips for musicians

Meet Margaret Leddy! A recent MBA graduate with a concentration in Investments. Maggie also has a masters in violin, and is based in Boston! Here she shares her knowledge and passion for music, and shares awesome financial tips. This is PART I.

When it comes to money, it is best to be honest with yourself and think about how you want to spend the money that you make. Some people value nice cars, others traveling the world, while others just want to spend the bear minimum and watch their money grow. But what makes a good investment and what makes a bad one? Is a college education worth the expense? Is it worth splurging for your dream car? These are questions only you can answer. However, if you do hope to retire someday, you will need to take some action now.

  1. Know your average income and average spending and create a flexible budget. If you haven’t done so already, consider setting up a budget. Take a look at how much you typically make in a given month, and how much you spend. You will have fixed costs and variable costs every month. Budgeting for fixed costs is pretty straight-forward. Those are the costs that never change month to month, such as rent, car insurance, utility bills, etc. Variable costs are those that tend to be less predictable.

    If you want to start tracking your money quickly and easily, just track your income and expenses day to day. You can either use an excel spreadsheet, google sheets, or a notebook. Sit down once a week (or every evening if you have the time!) and take a look at your transactions. Most credit card and checking accounts have separate transactions listed in real time.

    Sign up for an account on mint.com and link this to your bank accounts, credit cards, etc. Mint.com will sort your spending into categories based on the transactions that are listed in your accounts. For example, Eversource, an energy company, will automatically be categorized as a utility. With mint.com you can also set budgeting goals in order to stay on track.

    Be sure to account for taxes when you set up your budget. If you are a freelancer your taxes will probably not be withheld; in this case you may want to consider paying taxes quarterly so as to avoid paying a large sum in April. Always track any business related expenses, including transportation to gigs, strings, sheet music, etc. And consider consulting with a tax expert to determine other means of reducing your tax burden.
     
  2. When it comes to paying your debts, prioritize those with the highest interest rates, such as credit card balances. If you have a credit card with an unpaid balance, try to avoid using it. You may need to adjust your budget; find an area to cut spending so as to free up funds for eliminating high interest debts.
     
  3. Save for an emergency. Even if you are in debt, saving money can be possible with the right strategy. If the interest rate on your debt is higher than the interest rate on your savings, prioritize paying off the debt. If the opposite is true allocate a higher percentage of your income to your savings.
     
  4. Invest for retirement. If your employer does not offer retirement benefits, you may want seek out the advice of a financial professional. If you would prefer to take a stab at it on your own, consider an investment company such as Vanguard, which maintains retirement funds that are available for direct purchase. If you have no experience with investing, take a look at Betterment, a company that utilizes robo-advisors to help you navigate investment markets. I personally like to use target date mutual funds, which are designed for investors who do not wish to actively manage their accounts. Of course, there are risks that should be considered when investing--I highly recommend consulting with a professional financial advisor before undertaking any investment plans.

Some useful financial apps:

  1. Mint https://www.mint.com/
  2. Personal capital https://www.personalcapital.com/
  3. YNAB (You need a budget) https://www.youneedabudget.com/
  4. Tiller https://www.tillerhq.com/