#MusiciansandFinance is musicovation’s blog series exploring finance for musicians. All posts are contributed by graduate students in New England Conservatory’s Entrepreneurial Music course Finance 101: What Musicians Need to Know taught by NEC alum Jessi Rosinski.
by Jon Richardson
Musicians need to think about finance for a variety of reasons. One of the reasons it’s especially important for musicians to be aware of their financial situation is that their income typically streams from diverse sources. This fact requires musicians to know a heterogeneous set of financial rules and regulations. These diverse income streams require a more complex understanding of financial planning. While an individual taking home a bi-monthly paycheck still might need to understand some portions of how to save and how to do taxes, a musician needs a more customized toolkit. This is why teaching musicians about their own financial awareness is so crucial in music programs.
One of the first ways in which a musicians’ knowledge in finances is beneficial is in the area of taxes. Tax laws are difficult to understand, especially when it comes to freelancing, performing in different states, and self-employment. Musicians need to first understand the value of organizing the information in an effective and straightforward way. If a musician learns how to keep track of their inflow and outflow of cash they can be sure to be in a good situation should they ever get audited.
Additionally, different states have different tax regulations and some musicians feel confused by the laws related to performing in states outside their home state. It’s also important for musicians to know about how to know when to write off an expense. For example, some musicians might not know that the can write off as tax deductible. For instance, someone might not know that they could write off the tolls that they pay when driving to a lesson. As a general rule, it’s important that a musician be well versed in the laws around taxes so that they can be in better control of their financial portrait.
Another important aspect of finances is how to forecast expenses and make a budget for a show or a project. It’s important that students have a good understanding of how to put a budget together, write grants, look for funding, and allow for a rainy day. Musicians have to have a clear understanding of all the planning that goes into the planning and the execution of these large-scale projects. It’s crucial to their livelihood.
In our Finance for Musicians at New England Conservatory, we went through an exercise involving a case study of an a capella group on a college campus. In this study, we looked at a start-up singing group trying to plan for a years’ worth of performances and CD projects. We were able to look at all the expected expenses and judge them against our own perceptions of how they should have budgeted. It was a good reminder that financial literacy for musicians is not limited to personal financial management. It also showed the complexities of starting up a new musical group.
These are just a few of the important things a musician has to think about as it relates to finances. They’re crucial to the success of any professional, but a musician has an even more challenging task due to the more complex and diverse sources of income they collect.