Practical Advice For Audio Professionals Struggling With Money
Mike and I recently wrote about supporting the audio post community during this difficult time. Some of you reading are struggling with debt as work dries up. This article is intentionally practical but it is written from a place of genuine empathy, read on and you’ll discover just how bad things can get before they get better.
At the start of this article I want to tell my story. In 2006, because of a number of life events, I found myself in debt. There had been a number of life changes, suffice to say I was beginning again, only with one huge problem, a personal debt of nearly £40,000. I can only describe it like staring down the barrel of a gun. I tell you this because I think it’s important for you to know that I’m writing this from a position of knowing what it is to be faced with a mountain of debt. I want to tell those of you how to face it, and get past it to a place of financial security.
Many professionals in the audio industry face irregular income streams, unexpected expenses, and the ever-present challenge of staying competitive. In the last few months we’ve heard from many audio professionals who have had no work for months, it’s a challenging time.
When income drops and debts mount, it's easy to feel overwhelmed, I know I did. I’m not ashamed to say that I cried when I realised the scale of my own problem, I couldn’t imagine a way through it. However, addressing financial issues head-on and employing practical strategies can make a significant difference. This article aims to provide actionable advice for audio professionals grappling with money problems, particularly those dealing with debt and reduced income.
Face The Truth
The first step in regaining control of your finances is to gain a clear understanding of your current financial situation. This involves taking a thorough look at your income, expenses, debts, and assets. Here's how to get started:
Gather Financial Statements: Collect all your financial documents, including bank statements, credit card bills, loan agreements, and any other records of income and expenditure. Having all this information in one place will make it easier to get an accurate picture of your finances.
Calculate Total Income: Add up all sources of income, including your primary job, side work, and any other earnings. If your income fluctuates, try to calculate an average monthly income based on the past six to twelve months.
Calculate Total Expenses: List all your monthly expenses. This should include fixed expenses like rent or mortgage payments, utilities, and loan repayments, as well as variable expenses such as groceries, entertainment, and transportation.
Determine Your Position: Subtract your total debts from your income, including savings you may be living off. This will give you a snapshot of your financial health.
Assessing Your Outgoings
Understanding where your money goes is crucial in managing your finances effectively. By categorising and evaluating your expenses, you can identify areas where you can cut costs and save money.
Categorise Expenses: Divide your expenses into three categories:
Fixed Expenses: These are regular, recurring expenses such as rent or mortgage payments, insurance premiums, and loan repayments.
Variable Expenses: These include groceries, utilities, transportation, and other costs that can vary from month to month.
Discretionary Spending: This covers non-essential expenses like dining out, entertainment, and luxury items.
Track Expenses: Keep a spending diary for at least a month to see exactly where your money goes. This can be done manually or using an expense-tracking app. Use a free one, remember now is the time to reduce costs.
Review Bank Statements: Regularly review your bank statements to identify recurring payments and subscriptions that you may have forgotten about or no longer need. I use a handy app called Subly (there’s a free version) to show me my regular recurring expenses, it can even email you to tell you one is coming up. You can then cancel it if you need to before it’s left your account.
Identify Savings Opportunities: Look for areas where you can reduce spending. For example, can you switch to a cheaper mobile plan or internet, cut down on dining out, or cancel unused subscriptions?
Dealing with Shortfalls and Debts
When you find yourself facing a financial shortfall, it's important to take immediate action. Ignoring the problem will only make it worse, don’t bury your head in the sand. Here are some strategies to manage debt effectively:
Set Up A Plan: It’s important to have a plan to clear the debt and have financial stability. The most important thing I found out is that you can call up credit and loan companies and ask them to freeze the debt and interest and set up a payment plan. More details in the next section about this.
Prioritise High-Interest Debts: If you can focus on paying off debts with the highest interest rates first, such as credit card debt. This will help reduce the amount of interest you pay over time.
Consolidate Debts: Consider consolidating your debts into a single loan with a lower interest rate. This can simplify your payments and potentially reduce your monthly outgoings. Be careful though as some of these consolidation plans can be worse than not doing it in the first place. Find a reputable company and make sure to ask about set up fees and interest rates.
Balance Transfer Options: If you have credit card debt, look into balance transfer options. Some credit cards offer low or zero interest on balance transfers for a limited period, which can help you pay down your debt faster. This can be really helpful, in the UK right now there are several banks offering 27 months of interest free payments for balance transfers. If you choose this option then set up a monthly direct debit to clear the debt, if you can’t afford to do it in the time allocated simply do it again on the last month of the card as it runs out. Also cut up the card they send you once the plan is set up to stop the temptation of using it.
Seek Professional Advice: If you're struggling to manage your debts, consider seeking help from a financial advisor or debt counselling service. They can provide guidance on the best strategies for your situation. Don’t do this on your own.
Communicating with Banks and Credit Card Companies
Proactive communication with your creditors can make a significant difference in managing your debts. Banks and credit card companies are often willing to work with you if you approach them honestly and early.
Contact Creditors: Reach out to your creditors as soon as you realise you might have trouble making payments. Explain your situation and ask if they can offer any assistance, such as lower interest rates or a temporary payment plan. My card companies froze the interest and set up a plan to pay off the debt.
Negotiate Terms: Be prepared to negotiate better terms. This could include reduced interest rates, extended repayment periods, or even a temporary suspension of payments.
Request Hardship Programs: Many financial institutions offer hardship programs for customers facing financial difficulties. These programs can provide relief through reduced payments or other forms of assistance.
Maintain Transparency: Be honest and transparent about your financial situation. This builds trust and can lead to more favourable outcomes.
Reducing Outgoings to a Bare Minimum
When income drops and debts rise, reducing your outgoings to the bare minimum is essential. Here are some practical tips:
Cut Non-Essential Expenses: Identify and eliminate non-essential expenses. This might include dining out, subscription services, and luxury purchases. Check on those streaming services, when you add them up they could run to over £/$100 per month!
Minimise Utility Usage: Reduce your utility bills by being mindful of energy consumption. Simple actions like turning off lights, unplugging devices, and using energy-efficient appliances can make a difference.
Renegotiate Contracts: Review and renegotiate contracts for services like internet, mobile phone, and insurance. You might find better deals or discounts.
Shop Smarter: Save on groceries and household items by shopping during sales, buying in bulk, and opting for store brands. It might mean shopping at a discount store instead of the cool one. Plan your meals to avoid food waste. We often cook a batch of things like lasagne and then put them in the freezer.
Frugal Living: Embrace a frugal lifestyle by finding free or low-cost entertainment options, such as community events, outdoor activities, and library resources.
Sell stuff. Many of our studios are packed with things we never use, you could be sitting on several months of income when you turn that unused gear into cash.
Involving Your Partner, Not Your Children
Financial difficulties can put a strain on relationships, but involving your partner in the process can provide much-needed support. However, it's important to shield your children from financial stress.
Open Communication: Have open and honest conversations with your partner about your financial situation. Discuss your challenges, goals, and plans for managing debt.
Set Joint Goals: Work together to set joint financial goals. This could include creating a budget, saving for emergencies, or planning for debt repayment.
Collaborate on a Budget: Develop a budget together that outlines your income, expenses, and savings targets. Regularly review and adjust the budget as needed.
Protect Children: While it's important to be honest with your children about financial changes, avoid burdening them with the full extent of your financial troubles. Maintain normality and stability for them. I grew up in a house with challenging financial circumstances. However, I didn't know this until I was older as my parents shielded us from the worry. Explain any necessary changes in simple, age-appropriate terms. For example, you might say, "We're trying to save money, so we'll be eating at home more often."
Understanding Debt Repayment is a Marathon, Not a Sprint
It took me 7 years to clear the huge debt I had. I recall the day I paid my last payment off, it felt so liberating. You might not have a huge debt like me, but you might just need to get through a tough period of little or no income. Whatever it is, getting out of debt is a long-term process that requires patience, persistence, and a strategic approach. Here are some key points to keep in mind:
Set Realistic Goals: Establish realistic and achievable debt repayment goals. Breaking down your debt into smaller, manageable milestones can make the process less daunting.
Celebrate Small Victories: Recognise and celebrate small achievements along the way. Paying off a single debt or reaching a savings target are significant accomplishments.
Stay Motivated: Keep yourself motivated by reminding yourself of the benefits of being debt-free, such as financial freedom and reduced stress.
Regularly Review Your Progress: Periodically review your financial situation and adjust your plan as needed. This helps ensure you stay on track and make necessary changes.
Seek Support: Don't be afraid to seek support from financial advisors, support groups, or online communities. Sharing your experiences and learning from others can provide valuable insights and encouragement.
The end of my story is one of being changed. Before I faced the mountain of debt in my life I didn’t really take money seriously. I spent it without thinking, ignored bank and card statements thinking that would make them go away. I didn’t have any savings, I didn’t have a pension either. I was in a mess.
Once I had gone through this process my life was transformed, for one simple reason, I didn’t want to ever be in that situation again. Now I’m on top of my finances, have savings and I’m building up a pension. Debt changed me for the better.
Facing financial difficulties as an audio professional can be challenging, but it's important to tackle these issues head-on. By assessing your financial situation, managing your outgoings, dealing with debts, and involving your partner, you can develop a solid plan to regain financial stability.
Remember, getting out of debt is a marathon, not a sprint. Stay patient, stay persistent, and keep focused on your long-term goals. I kept a debt reduction tracker so I could see it going down each month, it was a small but helpful win. With the right strategies and support, you can navigate this difficult period and build a more secure financial future.
Photo by Dylan Gillis on Unsplash