Self-Employment Finances

This was nearly about “Self-Employment Without Needing Unemployment”, because I have been troubled by how many musicians and music teachers I have seen say that they will need to cut back on food or may be homeless because of the Covid-19 shutdowns. They were also unusually excited at the thought of unemployment being offered to them and said it would make an enormous difference. They must have been living in very precarious circumstances.

Unemployment is not usually available for the self-employed, so this also means things could have gone very poorly for the aforementioned musicians and music teachers. Something is clearly wrong, and part of the problem is a lack of savings.

I have observed throughout the years that a good number of musicians I have met seem financially illiterate, so here is a short version of what I think self-employed people should keep in mind regarding finances. Basically, try to maximize what you gain and minimize what you spend.

Money In

Fair Compensation

Set your rates or project fees so that you are paid fairly. I have noticed that some workers in the arts neglect to give themselves fair pay. It is also common for women to shortchange themselves.

Do not forget that as a self-employed individual, you get no employment benefits; you have to provide those for yourself. This means that you should be charging more per hour than a company would have employed you for. A typical company will give health insurance, pay social security, and allow you to claim unemployment. That is how much extra you should be charging your clients.

Make sure to think about all aspects of the work when setting your rates. If you do work where you must write a lot of emails back and forth or field calls, consider that when choosing how much to charge. If you need to travel to the client, perhaps a higher charge or a travel fee is necessary. That is all work you are doing, even if it is not the core work.

Remember that taking on a job for less than you are worth means you are underpaid, which may be worse than not being paid at all. It tells other people about how you value your work and how they should value your work. It opens you to further devaluation of your work and time.

Protect Your Time

To protect your time, it is best to know the project requirements before any work begins and to have a written agreement. Make sure the terms are spelled out upfront to manage expectations. Also, set your boundaries for when clients may contact you, because you may eventually run into the person who insists on calling every morning at 7 AM for updates.

If you do something where revisions are not uncommon, such as web design, composition, voice acting, etc., spell out how revisions will work or how many revisions the client will get. If you do something that is by-the-appointment, you may wish to protect yourself from missed appointments.

For example, when I do voice acting, I state upfront that excepting the case of an error on my end, I will do only one retake. My clients have been satisfied and accepted this very reasonable and common clause.

In the case of a music teacher who gets paid by the lesson, you may not get paid if your student does not show up. Teachers who would be crippled by losing a few lesson fees should charge a prepaid monthly fee and have a written agreement with the terms. The student loses the lesson and lesson fee if they do not show up and did not reschedule ahead of time. You already made this clear to them in the terms. You already have the money in hand and do not need to chase down the student.

Note: I personally do the pay-by-the-lesson model, because I like the flexibility. I assume my students will not take advantage of the flexibility and this laxer policy allows me to feel more comfortable cancelling lessons when I am unwell. Everything in life is a trade-off.

Choose Your Clients

You may feel that you have no choice but to accept every client who comes your way. This is untrue; you can be selective about who you want to work with. Also consider that a bad client can take up a lot more time and give you a lot more stress, so it may be a monetary gain but an overall loss.

If you have a bad feeling about a client, it may be wisest to not take this client on. You are not obligated to accept every single person who wants you to work with them. I have heard more than one story where someone thought a potential client seemed a little sketchy, worked with them anyway and then was stalked by the client. Use your judgement and do not feel bad about following your intuition. (Somewhat related, The Gift of Fear by Gavin de Becker is an excellent book.)

Money Out


Some people fall into the trap of wanting everything and the best now. The fact is, you do not always need everything or the best and it may not be best to have now. Think a little about what purpose it serves and whether you need it or it is more of a “just in case” thing.

Everyone’s circumstances are different: A musician who works off memorized music might need a very good instrument and a very solid case to protect it but is unlikely to need a brand-new iPad and foot pedal. Another musician who often takes requests might have an enormous library of music only partially memorized and need that iPad and foot pedal to gig effectively.


Simply insuring everything is an easy way to unnecessarily lose money. Run some numbers to figure out whether insurance is worthwhile. As usual, a good rule is that if you can replace your instrument easily and it is very unlikely that it will be damaged, you should consider skipping insurance.

For example, my piano is not insured. It is fairly inexpensive grand piano (a Samick bought at $10,000 20+ years ago) and, being a piano, is rather sturdy and is not leaving the house. The likelihood of it being damaged or stolen is low. I have owned it for more than 20 years with no damage, and I do not live in a flood zone. Regarding theft, a piano is a difficult thing to remove and pianos are not easy to sell. Given the low risk of damage, low chance of total loss, and low relative cost, insurance is a waste of money.

For an example of something I would insure, cellos are where an entry level professional instrument with bow, extras, and case is already $15,000 and most professional cellists I know play on $40,000 instruments. Cellists do take their cello out on gigs, so you are no longer in complete control of the environment. You can be as careful as you want, but someone could knock a music stand onto your cello (True story. The other pit orchestra musician did not want to pay up when he learned just how expensive the repairs would be.). An audience member who really wants to touch a cello could come up and accidentally topple it. The higher risk of damage combined with the higher cost means that I would insure it.

For one last note, if you purchase instrument insurance for an actually valuable instrument, use insurance companies that specialize in musical instruments! There are horror stories of regular insurance companies deciding that a new “Roth” violin is an equivalent substitute for an actual Roth violin, for example. That is a $800 new student instrument to replace a $10,000 antique!


ICs have a 15% self-employment tax. However, ICs have access to many more tax deductions than a employee would. It is simple to reduce your tax burden by keeping good records, which basically means keeping receipts and writing some things down.

There are possible deductions for vehicle use, a home office, internet and phone bills, meals when travelling for business, travel domestically and abroad, education to keep your skills honed, advertizing, and more. Many of these things are easier to calculate if you have one vehicle devoted to business travel, one phone devoted to business communication, etc. Do some research and keep your receipts. For one interesting detail, you can deduct instrument purchases as an expense, too!

Somewhat related to reducing taxes is the idea of maximizing retirement and HSA contributions, but that will not help you if you are already in an unstable position. If you need the money now, do not put it away for later. If you can afford it, you should do it. You can also leverage investment losses to deduct up to $3000 a year from regular income! It even carries over into the next year if your losses exceed $3000.

Then… Unemployment?

I am not saying that if you do everything right, you will have no problems. Sometimes, a bad situation creeps up on you or you have an unpleasant surprise. I simply think that some people are ill-prepared in part because they undervalued themselves and their work. Had they not, they might have had a little more cushion and hopefully not been to the point of rice-and-beans-for-every-meal as they claim they are now.

Right now, self-employed individuals can get some sort of unemployment benefit because of the CARES Act. Those who need it should take advantage of it. For those who did find unemployment benefits necessary, do not feel too guilty about it. You probably paid or will pay for something else that you did not or will not use. It might have been property taxes to support a school you have no children to attend. It might be that you will die early and not get to use Medicare/Social Security.

However, unemployment is usually not available for the self-employed. If you found that you needed unemployment, you are in a dangerous place. You should check and possibly revise your business model and pricing for when circumstances allow you to work again.

To make sure that you are not in dire straits the next time you lose a substantial amount of work and do not have unemployment to help you, I encourage you to make things easier for yourself as a self-employed person by making sure you are compensated fairly for all the time you put in and not losing money unnecessarily. That should allow you to make a savings cushion for unfortunate circumstances.

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