10: Financial Planning for Musicians
with Tiffany Soricelli
What does basic financial planning look like for a young musician?
Basic financial planning, like a basic financial plan in its simplest form, is simply just where you are currently financially, where you want to be, and then what steps you're going to take to get from A to B. That's a financial plan. Anybody can make a financial plan. In, in my industry, in the financial sector, a lot of times, people put together charts and graphs and binders upon binders of analysis to say, Here's your financial plan. But really, a plan is just an-- a set of action steps.
So for a young musician, you know, one of the things that I do when I work at young artist programs is we start the season with a current net worth statement that allows me to actually measure the progress of the financial decisions that are made during the course of our ten months together. So a net worth statement is simply all of your assets and then all of your liabilities in one place. So your assets are things like cash in the bank or any investments that you have. You know, some people lost their car as an asset because if you had to sell it, it could turn into cash. So put all of your assets in one place and then your liabilities are your, your debt, student loan debt, credit card debt, and personal loan debt as a young musician, when you when you put it all together and if you have student loans, your net worth might be, you know, $90,000 to the negative, which is normal for a lot of, a lot of young musicians right now.
But the benefit of, of understanding what your net worth is allows you to measure your progress over time. So once you know where you are currently, then make a plan for what you want. And usually I ask people, you know, What's the long-range plan? What do you want? Ultimately your life? Home? Family? Settling? I want to perform at all these institutions. Great.
Let's back that up. What do we need to do in the next, say, 12 months to be on track for that big, big picture view and then begin understanding one's own, you know, financial behavior? So after we get our net worth statement, some of the, the first things that one does in a financial plan is look at cash flow. How is money coming in? Where is the money coming from? How are you making money? Do people pay you to sub? Do you have a church job? Do you get competition winnings? Where are you getting the most money? Some people might find that they get paid a lot more to, you know, play some jazz at night versus a day job. And, and you might find that, Great! Once I understand that that's more lucrative, I'm going to lean in there, have some fun there. But understanding where money is coming from then allows you to plan how it's going out.
And I think a lot of times people look at a budget and they, they do the opposite. You know, they carve up income like pie and then they apportion it out, you know, to all of the things that they need to pay for. But I think one of the first things you really need to do is look at where your money goes first, right? What are our financial behaviors?
So in a, in a young artists financial plan, you have your net worth statement. We look at cash flow, you write down your goals. Everything, everything in finance is around goals. And it's, it's the first meeting that I have with my clients. It's the first session that I teach at the programs that I teach because the data is the data. The math is the math. Your spending is what it is. You can control it, absolutely. but until we get clear on what it is that you want, it's just black and white. So now that you have clear goals, you know what, what it is that you want, you want this career, you want this life, you want all of the things that you want. Now we look at our financial data through that lens and we can start making intentional decisions around where to put money, how to allocate it all in the support of those goals. That's-- I mean, anybody can plan it. Just take some time to sit down and, and begin sketching that out.
Kellogg:
What are some common financial goals for somebody, let's say, in their twenties?
Soricelli:
Common financial goals that I've seen for people in their twenties, you know, eliminating student loans, it's a big one. Paying down debt, becoming financially independent of one's parents.
You know, understanding one's own financial behaviors. becoming financially literate, making sure that you can make a living. You know, people have goals around I want to make money by doing... right, by working in music, not just a day job, not just a side job, but I want to make enough money through, through playing or performing to be my full-time income. Some people have really cool savings goals, you know, some people start with, I want $1,000 in my savings, okay? I want three months of my expense needs, six months...
I had a, a young woman... Her goal was I want $100,000 liquid cash before my 30th birthday and she hit it with two years to spare.
Kellogg:
Fantastic.
Soricelli:
Yeah, it was, I mean, it was just really intentional financial behavior. She didn't do anything radical. She just was really intentional about how she spent her money and where she put it.
Kellogg:
You know, you talk about goals... There's so much evidence that when goals are written down, the chance of achieving those goals, you know, shoots up. And goals are very different than the resolutions, something-- a resolution might be vague, but a goal could be something very specific. So having $100,000 by your 30th birthday is a very specific goal.
Soricelli:
Yeah. Yeah, there there's a ton of research around neuroplasticity and how our subconscious works to support goals. There's a great-- there's a great article in Inc. Magazine - It's online. Anybody can access it. It's not behind a paywall - but I believe it's called goal setting... "How Goal Setting Changes Our Brain and Why It's Spectacularly Effective" or something like that.
But it's amazing how, how we can use our habit building and how you can activate your subconscious brain to be in alignment with what you ultimately want. So much of our day to day is, is making millisecond snapshot decisions. But if we're really, really clear on what our goals are and we have an emotional tie to it, you know, the prefrontal cortex and the amygdala, the emotional part of your brain, work together to maximize those snapshot decisions to be in alignment with your goals.
It's, it's fascinating. But writing your goals down and reviewing them regularly, putting them in a place where you see it every day, even if you're not even reading it, but you see it every day, reminds your subconscious brain of what it is that you want. And then when your brain is working for your own success, it's, it's a life hack for really, How do we get to our goals faster? By being just really attuned to what they are.