Episode 9
Budgeting, Don’t Fear the Repo
The only word more uncomfortable to a musician then “sell out” might be the word “budget”. But whether you are recording death metal in your parents basement or getting a million views on YouTube for your Christina Aguilera cover performances, you are not immune to needing a budget. Tracking your monthly expenses; what monies come in and where your money is going, is a fundamental part of any well oiled music business.
0:00:01.7 S1: Welcome to the show that explores the methods and strategies on rock and the financial side of your music business with over 40 years combined experience. Here are your host.
0:00:12.5 S2: Chris Webb and Dave tank. Welcome to musicians. Tip jar are we talk about musicians and money, we teach you
0:00:19.8 S1: How to not drop the budget.
0:00:21.1 S2: Well, I
0:00:21.4 S1: Still keeping that 36 measure build up to eventually drop the base. I'm your host, Chris Webb, joined by my co-host, Ettore is DJ DT Dave Daman.
0:00:31.9 S2: Thanks for having me back. Cris, also here to drop the bass.
0:00:35.9 S1: The only word more uncomfortable to a musician then sell out might be the word budget, but whether you're recording death metal and your parents basement or getting a million views on your YouTube for your Christina Aguilar cover performances, you are not immune to needing a budget, tracking among the expenses, what money's come in and where your money is going is a fundamental part of a well-oiled music business. So don't link away, we'll be right back.
0:01:04.8 S2: Today's episode is brought to you by stone cottage studios. To believe that music and visual heart is transcending, has no borders, represents everyone and has the ability to live the heart and soul. We believe that music has the power to unite and light, motivate and inspire. Stooge studios provides a venue for musicians to reach their fans through video and audio production right here in Boulder, Colorado, check out their interview-based artist sessions, live stream events and filming and recording projects at stone cottage studios dot com. Welcome back, everybody to musicians tip cure. This week's non-profit is Women in Music. Women in Music is an organization with the mission to advance the awareness, quality diversity, Heritage opportunities and cultural aspects of women in the musical arts through education, support empowerment and recognition, the seminars, panels showcases achievement awards and Youth Initiatives celebrate the female contribution to the music world and strengthen community ties, Learn more at Women in Music dot org. This week's quote of the week is actually unknown. I tried my best to find someone who may have given credit to someone, but unfortunately, it's still unknown. And I would have just taken the credit.
0:02:27.6 S2: You should just say after this, just say, Chris web. I did change a few words on it and I figured Why not because... Yeah, take it up.
0:02:38.0 S1: It's not your spending habits that make you rich, it's your budget habits, Chris web, and then I got one more from Benjamin Franklin, beware of little expenses as small leaks will eventually sink great chips.
0:02:58.5 S2: That's true. That's a good one. If you enjoy this podcast, please subscribe or make a comment wherever you listen to your podcasts, as long as it's positive, all negative comments we'd like to receive individually to Chris at Seurat Com. I don't really need to hear any of them, and people don't have to infer negativity, so anything good or feedback that helps all the people... Please drop them in the comments section.
0:03:31.6 S1: I'm quite sure no one ever thought, I wanna be the next Bruner first, I better create a monthly budget, but without one, all those royalties could roll right out of the radar and all those liminal could have blown... You rise to start them. Today we're gonna break down budgeting into three sexy places, how to budget, bigger picture planning and habits to stay on track. Let's start with how to budget, how do... What is a budget? A budget is a plan of how we will spend our money, and it helps you make sure you will have enough money at the end of the month, it shows you how to spend your money and helps you figure out if you can spend less on something, if you want to spend more on other things, for example, from your budget, you might realize that you're wasting 150 on gene jackets every month, and you realize that you could reduce that to 50 a month and start using that 100 on nose flute lessons instead. You have bigger problems than your budget if you're spending 150 a month on gene jackets, you need a brown on a stone, last on a non-stone was 1 and a black one and one with a fur collar, but not real for cotton.
0:04:58.6 S1: A cotton collar. I'm done, I'm pretty sure you your budget is over 15 months with all the...
0:05:09.2 S2: I should be taking more notes, flu lesson. It's important to plan for now, tomorrow and our future, it's easier than you think, if you can start today, you can easily find your expenses from last month and start there, go to the basics first. What are your living expenses, food, internet, write down what money is coming in and from where, and then what money is going out, and for what... I think you'll be surprised if you haven't done that yet to see where those leaks in the boat are from Benjamin Franklin. You don't want any... Benjamin Franklin is leaking out your boat, right, you know, I just... I hate set it up like... Not bad, Chris.
0:05:50.9 S1: So the next step with all this is then planning out your quarters of the year, every business is spread out into four quarters, so quarter on quarter to quarter to 4, and usually most businesses have seasons, just like the music business certainly has seasons, tour seasons are usually in the summer, holiday obviously is a time for certain types of gigs to be her corporate events and private parties, and so some people are more busy than waiting seasons are usually in the summer, in the fall, but even for releasing music, there's a season for that, so quarters can be based on what your goals are for the year, and you can figure out how much money you're going to be basically making as a prediction for those quarters.
0:06:39.6 S2: And this is a good time to diversify your baskets to see where money coming... Where is money coming in from teaching your gigs live streams, now that we've discussed that royalties, merch sales, product sales, and any jobs you might even have outside the music industry.
0:06:57.4 S1: And you don't need to be advanced at spreadsheets to really get this down, a basic Google sheet. Will do, and all you really need to know how to do is type into the little boxes and write some numbers next to it, obviously there's much easier ways to make it look nice and to calculate numbers for you, and it doesn't take much to learn that by... Just looking on YouTube, but even just to get started, and if some of those categories that Dave just mentioned, such as royalties is something that is a zero for now, just write zero, but having the goal maybe by quarter to three to put some numbers there
0:07:31.6 S2: That are above zero. Yeah, that's a good suggestion. We can find some templates too, we could put it in our notes for people to grab
0:07:39.9 S1: After you've kind of figured out your quarters and your spreadsheet. The last part about a budget for me, it really is about creating long-term goals, I say that so much that I think that all of my students roll their eyes, because you can plan for one year, but if that one year doesn't have goals that are matching for a third year, three-year goal, and if that three-year goal doesn't match for your five-year goal, you're sort of not really headed towards any place in particular, you're just sort of getting by year by year, but the first step with budgeting is to get you out of living month to month, but that's the next thing, is getting out of the living here by a year. Right, and it gets to a point where eventually you can confidently say that you're headed towards a secure career because you've planned that far ahead, so there's lots of places where you can go to create your budget monthly, there's a million different apps. And so we're not gonna try to cover them all because I don't really think that gives us much benefit, but I will narrow down a couple that we use, I think between the two of us, we've used a few different ones, and I'm not gonna say ones are technically better than the others, but there are benefits to using different ones, just like everything else.
0:08:58.7 S1: Let's talk about a few budgeting resources that we can find easy, structured budgets. Some of these are free. Some of them are not. I'm a big Dave Ramsey listener, hostage was... I can actually... Another time, I have a great story about how he helped me get out of all of my bad debt, we'll talk about bad debt and a little bit, but it was an amazing journey of about a year and a half, and it was a lot of money that I didn't think was possible to get out of... And it did work. So if you're stuck deep in that heavy waters of bad debt, I recommend Dave Ramsey, and he has a nice budgeting system called every dollar, and that's one app that we can recommend...
0:09:50.6 S2: You introduced me to Dave Ramsey years ago, and I went on at the same journey, and you know, I thought you were a good friend before that, but after that recommendation, and I passed that on to a few friends as well, I love... I'm an audio book person, but yeah, I think I have think from A... Which stands for You Need a Budget is... Another great budgeting tool.
0:10:19.9 S1: He gets to be a little more complicated, but it allows you to be more complicated with the way you structure your budget, so it can grow with you or your business... It can grow with your business. And some businesses are pretty complicated, so you don't really wanna set up a system that can't be as big as your business wants to get... Another one that I use, I use this mostly with my personal finance for my family is Mint, and we've talked about in previous episodes, I believe, talking about how the the same brand that the same parent company that owns man, also owns Turbo Tax and QuickBooks. And the three should work pretty nicely together, I can't say it's always worked nicely together, but the idea that the three can be very easily transferable to do your taxes and keep track of your business and invoice people and budget, all within the same system is a wonderful concept, another one is Personal Capital, they've really stepped up their budgeting online platform, and they have great apps that help you with investing as well. Google Sheets is a very basic raw way of doing it, that you can just simply create your own and the way you want...
0:11:37.2 S1: The other place where you can get more on budgeting besides Dave Ramsey, of course, the in a podcast is another book called I Will Teach You To Be Rich. And that's another great resource.
0:11:55.3 S2: Profit First by Mike Calyx is a great book, teaches you how to separate your money when it comes in plan for profit and taxes or the non-expenses first, you can start saving your profit with something as small as like 1% from every check that you receive and then you can calculate your federal taxes deposit in another count, and then living expenses in debt, and that book really just change things for me as far as saving was concerned, and it helped me budget a little bit differently than I did before. It's a fantastic book, and it's a great analog. Do I wanted to be friends with the guy by Chapter Two, we'll take all these recommendations and we'll drop a link for them in or not.
0:12:40.2 S1: Christ next thing to talk about is the bigger picture planning, we mentioned making sure that you're budgeting beyond the month, beyond the year and up to about five years, I think is a general safe rule. Another big rule is to really eliminate bad debt, often, I found that the richest looking local musicians, I won't pick on anybody, but I do believe that it's hard to tell, and this isn't any... Not just musicians, this is everybody, it's hard to tell when you see somebody driving around in a nice car in the big house, and we don't know, but often, statistically, they're up to their vocal cords in debt, bad debt, car loans, credit cards, student loans for a refrigerator, was to people botev to watch the football game. They bought it for everything when they don't have the money, anything that doesn't make you money, and it's... ORs going down in value. His bad debt. So you really do need to make a plan how to pay off your existing bad debt, don't pay down debt with what's left over after spending, but only spend after you've paid down as much bad debt as possible.
0:14:12.4 S2: One of the tricks from Dave Ramsey would start with the debt that has the highest interest rate and attack it, which is a good way to structure your organization as far as where that money goes, you'll feel more motivated when you can watch one number decrease quickly rather than a few bills decreasing at a smaller rate each month, one role that I try to follow that attestations for something or it can't pay for itself by making money, then I don't buy it.
0:14:40.2 S1: I've had to say no to a lot of things that I wanted a lot of gene Jack is, is your day? But jean-jackets just don't make me money, or you're not wearing about assets or big... Perhaps that's why my Jinja are making me money 'cause my assets are to big things that make you money each month without you having to consistently pay time and attention to them or give your hours up for them, are real assets, such as creating online courses, selling your music or streaming your music online that pays for bills, or having placements in commercials, having a home studio that you own the real estate of the building and you can rent it out, the studio space, having equipment that's really nice can actually be an asset. If you own a nice Gibson from 1958 and it's a great condition, it's actually probably worth more money now, so certain instruments when purchased... Right, can actually be an asset. Another big question that I wanna bring up in this discussion about bigger picture planning. Here's what your net worth is. Now, your net worth size matters, no matter what anybody says. You need to measure it.
0:16:19.8 S1: So you know, just so you know, your net worth is what you own minus what you owe if, for example, you have a home and that home is worth 300000, but you owe 150000 on the home in your mortgage, then you have... The asset has a net worth of 150000, so basically everything that you own, minus all the debt that you have is your net worth, this is the number that you need to track from now on, budget, such as Mint will calculate this for you at Personal Capital and there's another one that will really study your net worth numbers and then help you really focus on how to increase those numbers, and really they all come back to the same target, which is get rid of bad dead and only invest in assets that will make you money. The last part of the bigger picture planning, the rules, is to always have emergency funds, I have separate emergency funds for my family and for my business, in fact, our business, this podcast has its own separate emergency fund as well, so you can separate them. And this might seem really hard to fathom how you can create a three to six month emergency fund when you're still struggling to get through each month, but I can promise you that if you stay consistent with your budget and honest with your budget, caught your expenses.
0:18:16.8 S1: Pay down your dad, that eventually you will have the money to put aside to create an emergency fund. One thing that Dave Ramsey says is that at the beginning, before you start tackling your debt is you get an emergency fund of 500 bucks, he might have even raised it to 1000 now, so the first thing you do to save that and then you tackle the debt so that this keeps you from going back into more debt if something happens with a flat tire or something.
0:18:41.5 S2: I wish we learned about Dave Ramsey before I dropped my 2500 Taylor under my paddle board when we had that show and Normal Illinois and I had like a 700, I come in my way as it punctured a hole right through the bottom and wanna play anymore, and I wasn't ready for that 700 expense, and if I could have just saved up over time and probably ate some more peanut butter and jelly sandwiches and stopped eating out for a while, I could use that money to have... In my emergency fund, which I definitely have now.
0:19:19.9 S1: I will never forget that face you made when you drive that guitar in that lonely Illinois town.
0:19:27.3 S2: Got a lot. Lonely or for you that I want cried a little...
0:19:33.7 S1: One other thing that I wanted to mention was I have created another... This might be something that is named different in different people's systems, but what I've come up with is to call it inevitable, and what I mean by inevitable is, is a separate fund, this is not emergency fund, this is the fun that you keep money for things that you are predictably coming up, that don't happen every month, things like recast ration, for me, it's kids activities and house repairs and things that are not going to come up every month, but you know they will come up, so I've told those up for each year, divided that by 12, and that's my inevitable fund that I draw from when those things come up. Now that we've gotten you all hot and bothered with talking about budgeting, let's talk about habits to keep you on track.
0:20:32.9 S2: The first thing I wanna say is, You need to lean on your community, you need to talk to your fellow artists about money, I mean, musicians are more comfortable talking about sex, drugs and rock and roll over finance, and the fact that... I just got to say that instead of you, because you wrote that down, I feel already cooler about self and those conversations like the Dave Ramsey... Like you introducing me to that. It's not so much talking about the dollar values that we're making, I think you and I had to look out for each other if there's certain gigs and you're like, Don't take less than this, or you know, we help each other out. But tools that we can use to budget and stuff like acorns or any other tools that we have to help us get ahead, definitely make that a part of the conversation.
0:21:25.9 S1: And it's also something that when we say money, that we don't mean to make anybody feel bad, about where they're at, right? And sometimes that's the reason we avoid talking about it, is that we feel this guilt, we know we shouldn't have bought another interface, now we have five interfaces on our desk, we feel guilty about it, but until it's just like almost any other bad habit that until we talk to our friends about it. It's something that we can't really confront, and I understand that too, that when you're playing a wedding and you find out that the other singer is making 200 more than you... That sucks, right? That's not something that we're saying when we talk about money, we're talking about building good habits, supporting each other when we're fearful or are struggling or confused about why things work, and taxes and all these things that we're talking about in these episodes, we don't ever talk about how somebody makes this much money and others don't... Is never gonna be about that. It's only about your personal journey and making sure that you can support yourself enough to be who you wanna be as an artist and be happy, so sharing your money goals with each other is actually a positive, telling each other about How you're saving up to buy that next, over priced.
0:22:51.1 S1: I've been as a guitar, or how you were planning out your next tour and funding it in cash, no debt, talking about ways that you're strategizing paying off that, so a basic cash flow statement, it should be one of those things that you get used to using all the time for every big tour, for every little or for every record that you create, sometimes even just for a single, the same process can be done and cash, even with your business per month, a cash flow statement helps you see how your assets are flowing money into your business and how your debts might be flowing money out, the goal is flow money in, no leaking, Benjamin's out.
0:23:45.3 S2: And you should check in on this weekly, and I know we've discussed sometimes daily, but the hardest part for me was when... I first started to look at the cash flow as I would do it at the end of the month. And it would be hard to think that I didn't do what I had planned to do, and if I would have just checked in sooner, so it can be discouraging if you don't, maybe start with a weekly plan for yourself and just to see if you could reach those goals, and it's not such a big hit when you failed the first month because we all do, it's just you're learning a new habit for yourself and you have to stick with it, just like being a great songwriter, it just doesn't come from the first couple of times that you try to write is on... You get better at it the more you do it, and it gets easier. The more that you do it, and you see the results once you start sticking with it for a long time.
0:24:44.4 S1: So the last thing I just wanna say on that is to learn to say no, sometimes that's the hardest part, but if we can all get through college without ever really having been in the hospital from drinking too much, then we know we can say no to a lot of simple things like the premium Spotify account, or for example, having too many drinks after a show when they don't include them with your bar tab or buying the new mic, just because your friends did, and I love that you bring this up
0:25:19.6 S2: Just because I like to add here that I went out last week and both the exact same I decreed for this podcast for the record. And you know what, Chris was not impressed me, I could tell that he wanted to ask if I budgeted for that Titian, now I'm gonna have to reconcile at the end of the month, and it's only... You know, I'm not gonna even say what Dick in the month it is, I'll be paying it off for a little bit, which again, I wish we would have done this episode before I bought the microphone.
0:25:54.5 S1: That brings up the next point that it's not about being perfect, we can't be day.
0:26:03.9 S2: Man, when I saw that, just so everyone knows, we try to get together and just go through notes that we wanna talk about, and when I saw that Chris put in or buying the new mic, just 'cause your friends did. I was like, Oh my God, you have to call me out. I didn't need to do that. I know you do.
0:26:26.7 S1: But I do mean that you don't need to be perfect, and I also believe that if things end up in your asset column, if they're gonna bring in money, then you are investing in your business, and so it's a fine line that we walk to know... Yeah, you could use a different mind, then that's where the debate might come in, but it's about buying things because they're over the investment for our growth of our business.
0:26:53.1 S2: And joking aside, I also looked at... Well, we've been talking about live streaming, I need a new mic that can pick up my acoustic as well with recording just for an EP working on... This would be a great asset there, so I did go through the tallies of where I can recoup this expenditure...
0:27:15.6 S1: Well, I could honestly talk about this sexy subject for days on end, and I know... I really do believe that it can change lives and make careers actually last, it's so simple, when it comes down to the fact that if we over-spend no matter how much we ever make, we will always be broke. It's so simple. And if you really do wanna make musician hood, your career, budgeting just has to be a daily practice, so if you wanna email and talk more about budgets with me, or if you'd like to contribute and add some ways that you have found budgeting to work for you, how can they get ahold of his day? Press.
0:28:04.9 S2: They can get a hold of us at musicians Jr dot com or send us an email and musicians to car at gmail dot com. And if you haven't yet, please make sure to rate, subscribe and comment as always, thank you for joining us and remember, there's already enough for everyone, you just need to know how to budget, how to get it. Until next time, I'm behaving. Send myself. Chris was Stay safe, stay, help take care of each other. Becoming a wealthy musician is hard, becoming a broke position is hard, just choose your hard... This his musicians tinting on this show should be considered soarers or professional advice, please consult an appropriate tax legal Leffler to financial professional for individualized advice. Individual results in our guarantee and oldest or strategies have a potential for profit and loss Orrin on behalf of musicians to let exclusively...
0:29:14.4 S1: Okay. Yeah. Okay, how are you recording me and record. Are you recording? I'm recording now. Ready? One, two, three. That's totally a hot... You clapped after me is one, two, three. Claps, I heard me clap and then I hear a new class, now I can see you, 'cause I wasn't looking at you for a try again to the... No. We are not lining up. Did that line up to you... No. Oh, okay, 'cause if it did, 'cause it could be a delay in the video that's... Got that again. One, two, three, e-