I’ll be the first to confess: I’m pretty bad with numbers. Over the last few years my wife has been slowly prodding me toward better financial practices, including writing down all of my business expenses. I wasn’t sure it would be worth it, but after almost a year of tracking nearly every dollar we spend (I still screw up occasionally) it’s been amazing the results. Here are 7 things that tracking expenses helped:
1. Tax season is easier, and the tax return is bigger.
When it’s time to do taxes, it’s as simple as sending out a few spreadsheets. As a self-employed musician, this is so much better than the hours of “guesstimating” that we used to do each year, and the write offs massively increase our tax return each year.
2. It helps me be aware of my spending.
By seeing each transaction in a spreadsheet, it allows me to understand what I buy and when. For instance, I realized I was spending a lot more on eating out then I expected, and a lot less on gear each year.
3. It helps me reduce how much I spend.
By understanding how much I spend and what I could accomplish with the money if I shifted my spending habits, I was able to reduce here and there. Even a few small savings of 5-10 dollars a week add up to significant chunks of change at the end of year.
4. It helps me realize what I find valuable.
Money talks. I realized I was spending a lot of money on stuff I didn’t value, and started working toward moving my finances toward paying for things I do value.
5. It helps us stay on target in lean months.
Freelancing as a musician means a constantly shifting monthly income. By tracking how much I’m spending and giving myself a bit of buffer room, we’ve been able to even out our finances enough to keep from going into debt.
6. It helps me find more money to spend on gear.
Yes, you read that right. By deciding what I find really valuable (gear) versus things I enjoy but aren’t that valuable to me (food) I was able to move my finances to things I enjoyed more.
7. It helps me plan for the future.
We all have predictable patterns that we don’t even realize we’re following. By tracking my expenses, I started to see patterns emerge (i.e. I spend too much on food after shows). By understanding these and planning better in the future, I’m able to project how much money I’ll need in the coming months more accurately.
What are some ways that you track your finances as a musician? Leave a comment with your reply below.