UNITED STATES. — In a twist no one saw coming (well, except maybe your bassoonist friend who majored in economics), classical musicians everywhere are trading in their ledger lines for financial ledgers. That’s right — who knew the secret to financial freedom was more scales?
For musicians pursuing careers as freelancers, orchestral players, administrators, educators, or composers, understanding personal finance can be the difference between thriving in their careers and struggling to make ends meet.
This exhilarating 7-part financial literacy guide covers the skills and knowledge necessary for classical musicians to build sustainable careers, and we’re here to make it as fun as a flash mob playing Beethoven in a food court!
Movement I: Understanding Multiple Income Streams
You know the drill: one day, you’re a wedding cellist; the next, you’re teaching seven kids "Twinkle, Twinkle," and by Sunday, you’re sweating through a live-streamed concerto. Welcome to the classical musician’s buffet of income! But here’s the secret sauce — having multiple income streams isn’t just an unspoken rule in music, it’s also financial genius. Classical musicians often juggle multiple roles, therefore, identifying these streams is crucial:
Freelance Performance: Income from gigs, chamber music, accompanying, and solo recitals.
Orchestral Employment: Salaries from full-time, part-time, or per-service orchestras.
Teaching: Income from private lessons, music school faculty positions, or workshops.
Composition: Earnings from commissions, licensing, and royalties.
Music Administration: Salaries from working in roles like operations, marketing, or development within music organizations.
Recording and Streaming: Royalties from digital platforms or physical album sales.
Grants and Sponsorships: Funds obtained for specific projects or performances.
Adjacent Trades: Music therapist, music producer, sound engineering, music journalist or critic, instrument tuner, music publisher, music producer, music librarian, music licensing specialist, A&R manager, music industry consultant, tour manager, events manager, etc.
Pro Tip: To get your foot in the door, make sure to network and collaborate, research market and industry trends, look into internships, practicum, fellowships, apprenticeships, certifications, join professional organizations and attend industry events, learn entrepreneurial skills like digital literacy, analytics, and data. If you are a college student, consider exploring cross-disciplinary studies, double-majoring, or specializing in different areas through certifications that you are passionate about.
When exploring various revenue streams, keep track of how each contributes to your overall income. Fill in gaps by teaching, arranging music, or (if you’re adventurous) performing a two-person musical comedy act. Now that the beloved TwoSet Violin has put down their bows, we need something to fill our void ASAP.
Movement II: Budgeting, the Foundation of Financial Health
Ah, budgeting. It might sound as fun as tuning a piano at 6 AM, but stick with us. Budgeting is really just a plan for how you’re going to make sure your paycheck doesn’t evaporate faster than the applause after an encore. Budgeting is essential for managing variable streams of income, a common scenario for many musicians.
Step 1: Track Your Income and Expenses Bach to Basics — start by categorize expenses into fixed and variable.
Fixed Costs: Rent, utilities, student loan payments, and (sniff) reeds.
Variable Costs: Food, transportation, entertainment. This would include that mysterious “Miscellaneous Expenses” category, like another Stanley Tumbler. Don't forget fun-money, because even the most disciplined timpani player needs a night out (or a delivery of Thai food after a rehearsal of Bartok's Concerto for Orchestra).
Step 2: Plan for Irregular Income
In months when income is higher (e.g., December due to holiday performances), set aside extra funds for leaner months (e.g., January or summer).
Aim to save at least 20% of your monthly income during peak earning periods.
Consider setting up an "irregular income fund," a savings account designed to cushion income fluctuations. This will help cover living expenses during months when income is low.
Step 3: Adjust and Review Regularly
Review your budget monthly. Adjust spending habits if necessary to ensure you’re not overspending in categories like dining out or entertainment.
Pro Tip: Use spreadsheets, budgeting apps, and financial software like YNAB or Mint to track your income and expenses, which are like metronomes for your money. They keep things steady, on time, and make sure you know exactly where you hit a few extra beats last month.
Movement III: Debt Reduction
Debt, also known as “the ghost in every music student’s closet.” Whether it’s from student loans, that shiny new flute you couldn’t resist, or an impulsive trip to Vienna “for inspiration,” debt has a way of lingering, making it crucial to have a strategy for repayment. But fear not! Handling debt can be your personal victory march.
The trick? Either go full Snowball Method (pay off the small stuff first) or Avalanche Method (go straight for the high-interest monsters). Either way, each dollar you knock off is like taking one step closer to playing your way out of the Haunted Mansion of Debt.
Types of Debt and How to Handle Them
Student Loans: Federal loans offer various repayment plans, such as income-driven repayment (IDR) plans. Explore options like Public Service Loan Forgiveness (PSLF) if you work in a nonprofit or public service music organization.
Credit Cards: High-interest credit card debt can quickly spiral out of control. Pay off the balance each month, or if you carry debt, prioritize paying off the card with the highest interest rate first (avalanche method).
Instrument Loans: If you’ve financed the purchase of an instrument, consider refinancing for a lower interest rate if possible.
Pro Tip: Focus on building an *Emergency Fund with at least 3-6 months of living expenses before aggressively paying off low-interest debt like federal student loans. This cushion helps in case of unexpected expenses or job loss. Did you know that 27% of Americans do not have an emergency fund? Most Americans can't afford a $1000 dollar emergency expense and often rely on credit cards to cover hospital bills or car accidents, but this only deepens the debt. If you find yourself in a dire situation needing help, please see the Immediate Assistance Resource Guide, which will be published on the Harpsichords & Hot Sauce site soon.
Movement IV: Saving and Investing for the Future
If saving seems as impossible as tuning a timpani with a worn-out drum head, welcome to the club. Here’s where classical musicians often stumble, but we have news: saving and investing can be as magical as the first time you heard the sound of a French horn. Building wealth and securing financial stability require saving and investing early, even on a modest musician’s income. Short-Term Savings
*Emergency Fund: As mentioned in the last tip section, this is where you set aside money to cover unexpected costs like medical bills or instrument repairs. Keep this fund in a high-yield savings account for easy access. Think of them as your emergency fund’s personal VIP section, where interest rates are higher than your average parking ticket. You can stow your spare cash here and let it grow into something more than pocket change.
Sinking Funds: This is where you set aside money for predictable expenses, such as instrument maintenance, travel, or annual dues for professional organizations.
Long-Term Savings and Investing
Retirement Accounts (Defined Contribution Plans): Open a retirement account such as an IRA (Individual Retirement Account) or a Roth IRA. For fully employed staff or administrators, you can contribute to a 401(k) or 403(b) if offered one by your organization.
Pension Plans (Defined Benefit Plans): A pension plan is a type of retirement benefit that many tenured classical musicians in orchestras receive as part of their compensation package. Unlike 401(k) or 403(b) plans, where employees contribute a portion of their salary, pension plans are generally funded by the employer. For classical musicians in unionized orchestras, these plans are often part of collective bargaining agreements negotiated by the musician's union, like the American Federation of Musicians (AFM). The amount is typically based on factors such as years of service in the orchestra, salary (often averaged over the highest earning years), and the benefit formula established by the plan.
Investments: Consider low-cost index funds or ETFs to start building an investment portfolio. Investing regularly, even in small amounts, can significantly grow your wealth over time due to compound interest. Think of the stock market as an orchestra — each investment plays its part. You don’t have to be a virtuoso; a humble index fund is like the cello section — steady, reliable, and will keep you grounded when times get tough.
Pro Tip: Starting early with investing is like practicing scales from day one; over time, that compound interest will make your savings sound like a virtuosic cadenza. Automate your savings and investments. Set up automatic transfers to savings or investment accounts to ensure consistency.
Movement V: Taxes — The Coda No One Really Loves But Needs to Face Anyway
Ah, taxes. The mere word makes musicians break into a cold sweat faster than an unmarked caesura in your music. As a freelancer, you’re not just a musician — you’re a bona fide small business! That means you get to play with tax deductions, the magical loopholes in the tax world.
Tax Deductions
Business Expenses: Deduct expenses related to your music career, such as instrument repairs (your violin bow doesn’t rehair itself, after all), sheet music, studio rent, travel for gigs, professional development costs, and even concert attire — because that all-black wardrobe isn't just for posing as a dark goth.
Home Office Deduction: If you teach or practice from home, you may qualify for a home office deduction.
Self-Employment Tax: Freelancers must pay self-employment tax, which covers Social Security and Medicare contributions. Plan for this by setting aside at least 25-30% of your freelance income.
Filing Taxes
Keep meticulous records throughout the year, including receipts and invoices.
Consider using tax software or hiring a tax professional familiar with musicians’ unique tax situations.
Tax laws and financial products change faster than a piccolo players fingers, so keep your eyes peeled and your ledger balanced.
Pro Tip: Open a separate bank account specifically for your freelance income and expenses. This separation will make it easier to track deductible expenses and manage tax payments. Find an accountant who gets musicians, or at least who won’t raise an eyebrow when you ask about deducting “reed cases" or "mute bags." They’re worth their weight in brass quintets come tax time.
Standing Ovation for Health Insurance
Let’s face it, the U.S. healthcare system is like a 12-tone composition: it's confusing and there's always a baby crying off in the distance. So when it comes to health savings and health plans, some of us are left improvising more than a jazz soloist. Here’s the lowdown on taking care of your health, so you’re not trying to barter Beethoven for a Band-Aid.
Health Insurance Options:
Marketplace Plans: Think of it as the Gig Economy’s version of shopping for a new violin. Explore the ACA Marketplace, where you might get a subsidy. (And no, it’s not a fancy music term—this is government money to help pay your premium!)
Union or Guild Plans: If you’re part of a union like the AFM, you might have access to health plans. Because nothing says “I’ve got your back” like a health plan from your sectionmate.
Health Accounts: HRA, HSA, and FSA are differnt types of health accounts that employers can offer as part of benefit packages.
Health Reimbursement Arrangement: Think of the HRA as the patron of your healthcare expenses. It’s an employer-funded account designed to reimburse you for qualified medical expenses.
Health Savings Account: The HSA is a versatile tool for those with a high-deductible health plan (HDHP). This is like a practice room for your medical bills. You put money in, it’s tax-free, and when those pesky dental appointments come up, you can whip out your HSA like a well-timed flute solo.
Flexible Savings Account: The FSA is the sprinter of the group—it’s short-term, employer-sponsored, and “use-it-or-lose-it” by the end of the year.
Pro Tips
For freelance musicians, the HSA might be your best bet if you’re eligible since it’s independent and grows over time.
For employed musicians, check if your orchestra or music organization offers an HRA or FSA. These can reduce out-of-pocket costs for healthcare. However, the HSA is all-around the best pick due to it rolling over and never expiring.
Disability Insurance Options: For classical musicians, the ability to perform is their livelihood and their passion. Unfortunately, injuries or health conditions (ex. Tendinitis, TMJ, Focal Dystonia) can sideline even the most skilled artist. That’s where disability insurance comes in—it’s your financial safety net when an unexpected injury or illness threatens your career. Disability insurance replaces a portion of your income if you’re unable to work due to a covered injury or illness. Without a steady paycheck, a disability can quickly lead to financial hardship. Disability insurance premiums typically range from 1-3% of your annual income. Factors like age, health, occupation, and policy terms affect the price. Example: A freelance violinist earning $60,000 per year might pay $50-$150 per month for a robust policy. Types of Disability Insurance
Short-Term Disability Insurance: Provides coverage for temporary conditions, typically up to 6 months.
Long-Term Disability Insurance: Kicks in after short-term coverage ends and can last for years or even until retirement, depending on the policy.
Key Features to Look For
Own-Occupation Coverage: Ensures you’re covered if you can’t perform your specific role as a musician, even if you’re able to work in another field.
Waiting Period: This is the time between when a disability occurs and when benefits begin. A shorter waiting period means quicker access to funds.
Benefit Amount: Policies typically cover 50-70% of your income. Ensure the benefit amount reflects your actual earnings, including freelance and teaching income.
Policy Riders: Optional add-ons like cost-of-living adjustments (to keep up with inflation) or residual disability coverage (if you’re partially disabled) can be valuable for musicians.
Tips for Musicians
Assess Your Risks: Consider the physical demands of your instrument and any pre-existing conditions.
Bundle with Other Policies: Some providers offer discounts if you bundle disability insurance with health or life insurance.
Document Your Income: Freelancers should keep detailed records of all income sources to ensure accurate coverage.
Consult a Specialist: Insurance brokers who understand the unique needs of artists and performers can help you find the best policy.
Providers Popular with Musicians
AFM Insurance (American Federation of Musicians): Offers disability coverage tailored to union members.
Berklee Alumni Insurance Program: Provides specialized options for musicians and alumni of Berklee College of Music.
Private Providers: Companies like Guardian, Principal, and MassMutual often offer customizable plans for self-employed individuals, including musicians.
Encore: Financial Planning for Big Purchases and Career Investments
So, you’ve got your eye on that $100,000 Stradivarius, or maybe you're dreaming of renting out a cathedral for your next solo album recording. Bravo! But before your wallet takes a fortissimo plunge, let’s talk strategy. Big purchases are the crescendo of financial planning—they need a clear budget, steady savings, and a well-timed rest (to avoid impulse spending).
Sure, you could swipe your credit card and pray, but it’s better to avoid turning your finances into a tragic opera. Remember, a smart financial plan ensures that your bank account doesn’t play Dies Irae every time you check your balance.
Planning for Big Purchases (or How Not to Accidentally Sell Your Soul for a Steinway):
Create an Instrument Savings Plan: Estimate the total cost for that new instrument and set aside money monthly to meet your goal without going into debt if possible.
Explore Financing Options: If necessary, consider financing but opt for low-interest or no-interest options if available. Think of it as finding a good accompanist—they should support you, not leave you hanging with sky-high rates.
Pro Tip: Treat career investments as part of your overall financial strategy. Weigh the potential return on investment (ROI) before making significant purchases.
Investing in Your Growing Career:
Budget for attending auditions, or ongoing professional development such as attending workshops, festivals, music conferences, and obtaining certifications.
Consider a business account if you’re going pro with albums or merch. It’s like a separate practice journal for your music biz—keeping things tidy and organized.
If you've started a business and incorporated it into an LLC, Sole Prietorship, or Nonprofit, then working with tax pros or CPAs is one of the best ways to ensure that your business's accounting needs are met. They can help you with all aspects of accounting including cash flow management, business planning and budgeting, and tax returns for small businesses.
Conclusion
Your financial health deserves as much attention as your practice sessions—because who wants to crush Paganini while their bank account screams "fortissimo overdraft"? With a little planning and a lot of practice, you’ll build a career that’s not just sustainable, but truly Bravo-worthy!
(c) Harpsichords & Hot Sauce, 2024
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