Many singers have had fabulous careers and earned star salaries, only to live out their later years in poverty. It’s a very old story, unfortunately. Georg Frideric Handel’s star soprano, Francesca Cuzzoni, (1698-1770) sang in all the great opera houses of Europe, but her extravagant lifestyle left her deeply in debt. By 1750 her voice was completely gone but she was forced to try to raise money by singing a benefit concert in London. It did not help much and, after some time in debtor’s prison, she spent the rest of her life working as a button maker.
Although we don’t need to worry about debtor’s prison, singers can still spend their golden years in less than optimum comfort if they don’t save. Modern stories abound of singers who refused to save during their earning years and had to live off of others later on.
A divo or diva needs to have an extravagantly rich stage persona, but offstage most of us need to choose our spending priorities wisely.
Have you checked out your financial health lately? It’s always good to compute your net worth once a year so that you can see how much it has improved (or worsened).
First, add up your assets. Your talent is priceless, so we cannot include it here, but do not forget that you have a unique asset and that its care is your responsibility. What you do need to count is the value of each of the following that you own: a house or apartment, one or more cars, a boat, savings accounts, investments, a piano, a computer, recording equipment and any other similarly expensive items. Adding up their worth should make you feel good.
Now total up your liabilities. They should include money owed on your home, cars, piano, boat, or other large items. You also need to count your credit card balances, college loans and any other debts you have.
When you subtract your liabilities from your assets, (or assets from liabilities) you have your net worth. Sometimes it’s a negative number. Don’t let that upset you. You might need a cup of tea or a piece of chocolate first, but you are going to work on improving your situation.
Do you put away some of your savings each time you get paid? You need to pay yourself first, preferably by an automatic transfer to your savings or money market account, so that you are not tempted to spend it. When you have built up some savings you will be able to borrow from yourself instead of taking cash advances on which you have to pay interest.
This is a good time to look at your spending habits. Unless you live alone, you will need to sit down with your spouse or partner to talk about your spending priorities and formulate a budget.
Here are some basic principles that anyone can follow. More information on them can be found in the sources listed in the bibliography at the end of this article.
To begin budgeting you need to plan target amounts. Set down how much you would like to spend on each item. You will then need to write down your actual spending on a daily basis in a small book, which we will call your “personal tracker.” If your spending totals don’t agree with the target amounts, you need to adjust one or the other.
You may be surprised to find where the money actually goes. If you spend a great deal on beverages and snacks you might want to bring some food from home.
When a disgruntled opera goer asked Giuseppe Verdi to refund money spent on a trip to see Aida, he wrote back that he would send the price of the ticket and the man’s train fare, but not the money spent on his dinner, because he could well have eaten at home. The composer was no spendthrift.
In establishing target amounts for your budget, you need to consider the following items:
1. Shelter
Your housing arrangements should be your largest expense. It needs to include your rent or mortgage payment, property taxes, all utilities, repairs, cleaning, and the purchase of furnishings. Note down the amount you must pay each month. For expenses not paid monthly, take the yearly total and divide it by 12. That is the amount you must put away each month so that the money will be there when you need it.
2. Food Cooked at Home
It should be in a separate account from restaurant meals because the home kitchen is a top priority.
3. Children’s Expenses
Money to spend on your children will be another top priority item. It should include daycare, savings for college, etc., or, if your children do not live with you, child support. Remember to count both monthly expenses and those paid a few times a year with this and all ensuing accounts.
4. Medical Expenses
This account should be for costs that are not covered by insurance. It should include not only medical expenses, but also dental, eye care and veterinary costs.
5. Insurance Costs
Here is where you keep the money you need to pay for insurance premiums when they are due. You need to have health, automobile, homeowner’s or renter’s insurance, and if you have children, a term life policy.
You can check www.ehealth.com for a comparison of premiums and coverages offered by various companies. Higher deductibles result in lower premiums, but you need savings to cover the high co-payment.
Once your car is paid off, you can decide how much insurance you wish to carry on it in addition to the required liability coverage.
If you don’t have children, savings and investments might be a better choice than life insurance.
6. Transportation
Cars cost a great deal so it is important to see that they are always properly maintained. Put money aside regularly for repairs and lubrication. Be sure to make your car payments because you know what happens if you don’t. If, however, you have a spouse or partner and both of you can manage with one car because public transportation is available in your area, you will save a good bit of money. Of course, you will always need to budget money for various kinds of transportation, gasoline, car registrations and parking.
7.Debt Service
Do you have debts to pay off? Most people do. Hopefully you can pay quite a bit more than the minimum on each credit card and still save some money to use for emergencies. If you feel the need to “shop ’til you drop,” do it with the cash already in your pocket.
Should you cut up all your credit cards? Emphatically no! You will need them for travel and emergencies on the road, but you don’t need too many. You definitely need one, maybe two, but not more than three.
When you charge something, deduct the amount from your checking account and post it to a separate column for charges, which you keep in your checkbook. If you have free checking, put charges in the column for bank fees. That way you will have the money ready when the bill comes in.
Do you need to borrow money for college or graduate school? Check out the possibilities for subsidized Stafford Loans at www.financialaid.com, where you can also get information on the consolidation of existing college loans.
If you have more debts than you can pay, prioritize them. Those creditors whose debts are secured by collateral can take something away from you in short order. Others can immediately shut off a service. If there is something you absolutely cannot pay, make sure that the creditor would have to sue you to collect. That could give you enough time to raise the money.
8. Career Costs.
I suggest having a separate account for your career. That way you can see if your singing is paying for itself but, even if it is not doing that yet, you cannot cut back on this account. Your talent is worth supporting.
If you deposit your career earnings into this account you should eventually be able to use it to pay the costs of music, voice lessons, coaching, management, photography, and recording, as well as audition fees, transportation, lodging, food, and clothing for career activities. You might also want to investigate prepaid legal services, [see article Nov. 03, p. 36] which could enable you to have a lawyer look over your contracts before you sign them.
9. Savings
You will eventually want to get a money market account that pays a reasonable amount of interest on your savings. Into this account you should be able to deposit 5 percent of your net paycheck while you are paying off debts and 10 percent after some of the larger ones are paid. Remember to pay yourself (your savings account) first, before you put money into any other account.
When you have $3,000-$4,000 in the money market account it will be time to look at some stock and bond mutual funds. Many planners suggest putting 40 percent of your money in high-grade bonds and 60 percent in blue chip stocks. At that point, however, you would do well to speak with a well-recommended professional financial planner about investing.
10. Education
This does not mean singing lessons. If you have children, you will want to put aside money for their schooling. You may also need to put aside some money for courses that will help you advance in your day job.
11. Taxes
As a self employed professional you will probably have to pay estimated taxes on a quarterly basis.
12. Gifts and Charitable Contributions
Be sure to set aside money for important occasions. You will probably want to contribute to organizations that promulgate your beliefs as well.
13. Recreation
After all this belt tightening, you need a bit of fun. Set aside a reasonable amount for recreation and at least a few days of true vacation at some time during the year.
14. Food Eaten Away from Home.
Now, here is an account from which you can take money if you need to cut back. Just think how much of a priority restaurant meals are in your life and how many of them you really need each month.
15. Clothing
You will need money for good work clothes but, while clothing for sports and recreation needs to be functional, it need not be expensive. If you have a teenage son or daughter, he/she will have to learn that lesson, too.
16. Your spending money.
If you have a spouse or partner, he/she needs an account for spending money, too. You can decide how much you really need after you have kept your daily tracker for a week or two.
Once you have set up your budget and are using your daily tracker you can adjust your target amounts. When you analyze your personal tracker book(s) at the end of the month you will find out a great deal about how you really spend your money. Then you can more accurately see what changes can be made. Good luck, your future is in your own hands!
Bibliography:
“It’s Never too Late To Get Rich” by Jim and Rich Jorgensen, published by Simon and Schuster, New York, 2003
“Financial Fitness for Life” by Jerry Mason, published by Dearborn Publishing Co, Chicago, 1999
“Ten Steps to Financial Success”by W. Patrick Naylor, Ph.D., published by John Wiley and Sons, New York, 1997
Interview with Arizona Attorney General Terry Goddard on HORIZON, KAET-TV Phoenix, Nov. 3, 2003
http://moneycentral.msn.com/content/savingsanddebt/learntobudget/learntobudget.asp
www.financialaid.com
Stafford@financialaid.com or (800) 805-1177
www.ehealth.com
