Entrepreneurs and musicians share much in common. Building a start-up company is similar in many ways to getting a band off the ground. One thing both entrepreneurs and musicians have to make sure they do well is manage their money. At the early stages there’s usually not much money laying in the bank and every expense needs to be considered carefully.
Here are a few things I find useful in managing my personal and my business expenses. They’re not designed with big companies or bands in mind, but simply common sense things that most people neglect to do.
The Black Book
Growing up I used to mock my dad for tracking every expense. He had a small black book, which he used to write in all of the expenses of our household. Every Saturday he tallied the amounts, which often led to him being in a bad mood. It drove me nuts. Was it really necessary to write everything down and get upset about it?
Fast forward 10 years. I moved out of the house, out of the country, to Boston. As a student, with very limited income, I quickly realized that I have to be very careful about my spending. But I didn’t know exactly how much money I spent every month, and what I was spending it on. Shamefully, I followed in my dad’s footsteps. I started writing down all my expenses. At first it was unpleasant. I felt like I was policing all my monetary activities. I quickly learned that what I thought were one time special expenses (airline ticket, lawyer fee, studio gear, etc.), were actually occurring almost every month in one form or another.
Within a few months of logging my expenses I had precise knowledge of how much money I spent and how I spent it. It felt good. I knew how much money I needed to earn in order to sustain myself, and what kind of adjustments I had to implement to my spending.
Is That Really Necessary?
The next step to financial sustainability is going through all of your monthly expenses and asking yourself “can I afford this?” Is the $90 cell phone plan necessary, or can I do with a $60 one? Should I buy a new car with monthly payments, or get a cheaper used one? How much can I really afford to pay in rent every month? It’s a simple concept, live within your means.
Restraining our spending habits can be tough, especially in a capitalist society. The system is designed to encourage us to spend more, not less. It takes a lot of effort to resist the temptation to spend money. But at the end of the day I think it’s a lot more fulfilling to acquire financial sustainability, than a new house that puts a huge hole in your pocket.
Pay On Time, But Don’t Auto-pay
I’ve yet to meet a person who enjoys getting bills. The instinct reaction of many people to bills is procrastination. But if you think about it in a rational way, there’s really no point in not paying bills right away. Procrastination can only increase the odds of forgetting to pay the bill on time, which results in extra fees and penalties.
I stay away from any auto-pay bill payment options. Auto-pay plans are so easy to forget about. The money is deducted directly from your bank account or credit card, and unless you make a conscious effort to monitor it you won’t notice an out of the ordinary bill charge. It is important to look at the bills and see if you are charged correctly.
Avoid Credit Cards
Credit cards are evil. They are designed to make people spend more than they can afford. It is a lot easier to swipe a plastic card than to reach into the pocket and realize there’s no cash left in there. Credit card companies charge absurd interest rates. Anyone who’s looking to achieve financial stability should take a pair of scissors and cut their credit cards into very small pieces.
Spend It On The Right Things
As important as it is to cut down on unnecessary spending, it is equally important to spend money on things that matter. Does it really make sense to not get health insurance when a few short hours in an emergency room can cost $5,000? Is saving money on food by eating McDonald’s or other junk food really saving you money in the long run?
Investing in good health, education, and building a career will ultimately lead to a better future. One shouldn’t feel bad about spending money on these things.
To sum it all up, in my opinion financial stability and a debt free life are worth far more than owning a bunch of things one can’t afford. It’s true, my dad used to get upset once in a while about our household spending, but now both him and my mom are enjoying their retirement lives without having to worry about their financial situation.
EVP of Music
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