I am not musically inclined. The phrase, ‘can’t catch a tune in a bucket’ is an accurate description of me.

It takes a certain skillset to string together sound that is pleasing to the ear. And if you have the rare gift of pleasing a crowd’s eyes and ears, you have a unique talent.

We live in the Nashville area and understand the difficulties of succeeding in the music business. Odds are if you are reading this article, you have earned some success. Congratulations!

As planners, we have run into some common themes those in the music business should consider. Thus, we have developed the Ultimate Guide to Financial Planning for Musicians. Without further ado, let’s dive in.

Manage Inflows and Outflows of Cash

Your income is volatile. That is the nature of the industry. Creating a budget helps to know what it takes for you, your family, and your team to survive. We have seen several successful artists struggle because they didn’t manage their budget well.

You don’t have to make it complicated. Split up expenses into two categories:

1. Fixed expenses

2. Variable expenses.

Fixed expenses are consistent costs that stay around the same amount. Variable expenses are consistent but less predictable in size. List both categories and track them for three months to get a baseline. Apps like PocketGuard, YNAB, and EveryDollar are great tools to use.

Creating a budget will help you manage the cash flow needed to navigate the volatile seasons of life.

Build Your Team

Outside of talent, your team is one of the important drivers of long-term success in the industry. The right team will limit the distractions and disruptions, so you can focus on what is most important. These include attorneys, agents, managers, accountants, financial advisors, and assistants. Some can handle multiple roles. Others are strict specialists.

Having the right team will allow you to focus most of your time on your creative talents and leverage your team for the other items. This will lead to fewer headaches and more clarity.

Build Savings for Gap Months

When times are good and income is strong, you are in the rainy season. Set out the buckets and collect as much cash as you can. Most of the time we see projects last a month to upwards of four months, where income is very good.

But, the next project is not guaranteed. Income is inconsistent and there may be a few months where it looks like small residuals or hardly anything at all.

We call these the gap months and prefer at least 6 months’ worth of expenses in a savings account. These funds are to sit in cash.

These savings can sit in a savings deposit, safe in your home, or invested in nothing more aggressive than a money market account.

Build Long Term Savings and Investments

If you can cover your bills and have some short-term savings, the next step is to build some long-term savings.

There are several ways to do this.

If your name carries some weight and recognition, you can use your brand to invest and collaborate.

You can also start participating in Real Estate, especially if your music business needs working space. By owning the space, your work offers a great way to save some on taxes and build long-term savings in the form of equity in the building.

Another option would be to set up a retirement plan, or deferred compensation plan. Whether you are a sole proprietor or have a small team of employees, you can set up a retirement plan much like the bigger corporations do. These types of plans can offer significant tax savings and long-term growth opportunities!

Protect Yourself and Your Family

There are a few items that are crucial to protect your hard work, as well as your and your family’s well-being.

If you forget everything else in this blog post, remember this:

Create a will.

Hire a competent estate attorney who specializes in the music business. Most musicians have a complicated income structure and vast catalog. Protect your asset so the income has a beneficiary when you are gone.

If you don’t determine the direction, someone you don’t know will. Put it on paper. Name where your money and income will go. If you have young children, name who you would like to be the custodian until they have reached the age of majority.

Second, consider purchasing insurance. Unforeseen problems happen and there are two main areas to consider outside of the typical home, auto, and health insurance. If you are married or have young kids, consider term life insurance. It is relatively inexpensive and can provide some cushion in the form of income replacement.

Next, look into some disability insurance. As an entertainer, it is challenging to get and a little on the expensive side. However, it can be a significant windfall should some problems arise and you cannot physically do your job. A competent insurance agent who specializes in the music business can help you walk through these options.

Success in the music business is hard to achieve. The competition is steep and many times the success is a narrow moment of time of your life. Those in the business that live a healthy, prudent life plan accordingly. We like to say, “if you protect the downside of your career, the upside will take care of itself.”

Best of luck! If you have any questions or would like some guidance, give us a ring. We'd be happy to help.

Any opinions are those of McCall & Associates and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

The investments mentioned may not be suitable for all investors. Raymond James and its advisors do not provide tax or legal advice. Be sure to consult with the appropriate professional in regards to your particular situation.