I'm 26 years old and have lived in Nashville for over 2 years now. In that short period of time, I've learned some things about finances as a freelance musician. These are things I wish I had known before becoming a professional, but sometimes on-the-job training is the best way to learn.
First off, you need to record everything - meal expenses, cell phone bills, mileage, parking fees, etc. There are a few programs you can use for this to make it easier. I like to use www.mymusicstaff.com to record everything. It's not just for teaching - you can use it to record your income from gigs, all expenses, and mileage. A graph of your finances is created, which creates a great visual summary that's easy to understand. You can also get a pdf summary of your finances at the click of a button - great when it comes to tax time. I should also add that it's a good idea to record the way in which you were paid - was it cash or check? W-2 or 1099?
Another good program I've come across is www.everydollar.com. This is a comprehensive budget app through which you can record everything in your budget - bills, groceries, car maintenance, gas, etc. Dave Ramsey recommends you put a name on every dollar and stick to the budget you've created. More about this philosophy at their website. My husband and I use this app in a slightly different way - we still record everything, but instead of accounting for every dollar we see how much is left over at the end of the month and divide that amount however we like towards our financial goals. This gives us the flexibility that our freelance careers require.
Secondly, you must pay taxes. Recording everything will help you get a better picture of how much you'll owe when it comes time to fork it over. It's a good idea to put a portion (we do about 20%) of everything you receive into a special savings account solely dedicated to paying taxes. You can either do this with every single thing you receive or as a lump sum at the end of the month (or whenever you desire). A big professional expense, such as a new instrument, can be a write-off and can help offset the amount you owe for taxes.
Third, planning ahead is a very good idea. Plan your budget carefully - are there any expenses that you are spending too much on (coffee, eating out, etc.)? The more you trim, the fast you'll reach your financial goals. Have an emergency fund - just in case you have large unexpected expense, such as a health emergency or new car tires. On the smaller level, plan your meals. If you're going to be out all day for rehearsals and such, give yourself time to eat breakfast at home, pack a lunch, and then treat yourself to dinner. Every little bit helps.
I've always been a hands-on, practical person. I like to know how things work - how all the pieces fit together. This blog is a collection of advice, experiences, and questions intended to be a practical guide for aspiring freelance musicians.