We’ve had a lot of articles discussing the advantages of acting as your own music manager. But, there are certain responsibilities that come with these dual roles.
One such responsibility is the handling your finances.
You’re in charge of keeping track of earnings from gigs, online sales, and other revenue streams. And, you’ll need to set aside money for growing your music career. This includes everything from studio time to equipment.
If you want to make it in the music industry, it’s a good idea to start learning how to master your finances – starting with these 5 great tips.
#1 – Keep Your Personal Finances Separate
The first tip is to keep your personal finances separate. Don’t write a personal check for equipment or a music-related purchase. These should be purchased through an account that is used just for your music.
You have two options for setting up this separate account. You can either file a “doing business as” DBA form or register as an LLC (limited liability corporation). Either option will allow you to conduct business as your band or under your stage name.
Keep track of all purchases and income. This means keeping your receipts for the year. Store your receipts and other financial documents in a safe place, so that you’ll be ready for tax season.
#2 – Don’t Take on Debt to Fund Your Career
You shouldn’t be in a rush to advance your career. Don’t take on debt to pay for studio time or promote a new album. The budget for these expenses should come from your music income.
Remember, you want to keep your personal finances separate. If you need money to pay for studio time, you’ll need to wait until you’ve got enough money in your business account.
If things don’t pan out, you don’t want to end up in debt. You’ll never have to worry about this if you avoid spending music money on personal expenses.
#3 – Diversify Your Income Streams
If your only music-related income comes from live performances and gigs, then you’re likely going to struggle to make a comfortable living with your music. You’re going to need to diversify your income streams.
Basically, you’re going to need multiple sources of income – such as digital sales, streaming revenue, merchandising, and music licensing.
The more sources you have, the greater your chance of success.
Several of these income sources will require a website. If you don’t already have a website, now is the time to get one up and running. It’s an essential part of any music marketing plan.
Your website acts as the central location for all details about your music – including contact info, upcoming performances, and links to where people can find or buy your music.
To learn more about income streams for musicians, watch the video below. It’s the first part of a 3-part series that discusses each of the major revenue streams in detail:
#4 – Don’t Pay Yourself Too Much
You deserve to get paid for your hard work, but you shouldn’t pay yourself too much. Continue to treat your career like a business. Don’t embezzle funds from your business account.
You should get a portion of the profits. The profits are your earnings after you subtract expenses. This can be determined after each payout – or monthly. Generally, it will be easier to determine profits & losses monthly.
When you’re first starting out, pay yourself up to 50% of your total earnings. If you’re part of a band, the band splits this 50%. This means that 50% of profits, after expenses, goes back to your business account and is used for music promotion or marketing – or saved…
#5 – Save Half and Spend Half
After you’ve paid yourself, and your bandmates, the remaining profit should be split between savings and marketing. This is just for those that are starting out. As you advance your career, you can start to scale back the amount that you spend on marketing.
But, for now, spend half of your remaining profits on marketing and save the other half. This other half should go to a goal – such as new equipment.
By dividing your earnings in this manner, you’ll be spending about 25% of your profits on music marketing. This should give you plenty of funds for Facebook and Instagram ads, along with other online marketing solutions.
The bottom line is that you need to be smart about the money that you make. Don’t treat every payment as a personal check that you can deposit and spend as you choose.
Think of your earnings as belonging to your music business and then pay yourself – but don’t pay yourself too much and remember to save a portion of your funds for future investments.
Finance is just one part of your career. For more advice on making it without a music manager, check out our guide – Music Management for the Indie Artist!