Time to Dream

Okay, most of my blog posts up to this point have essentially been exhortations to be disciplined and save money. Doesn't sound like much fun, does it? And what is the point of saving money anyway, when I could walk out the door and be hit by a bus tomorrow? Well, the point is to achieve my dreams, most of which will require money. And since I probably won't get hit by a bus tomorrow, some kind of plan seems in order.

So now I'm going to ask you to dream -- something that musicians are generally pretty good at! Dream about your future. What kind of lifestyle would you like to achieve, and by what age? Where would you like to live? Do you plan to get married, or put kids through college? How long do you expect to keep working? Some of these goals may not yet be clear to you, or may change as your life progresses, but try to picture your future as best you can. Estimate roughly how much money each goal might require (taking future inflation into consideration), and divide your goals into short-term, medium-term, and long-term categories.

It can be shocking to add up how much you will spend over a lifetime! It can also be pretty impressive to estimate how much money you will earn in a lifetime. If you're a musician, chances are good that the lifetime earnings estimate will appear lower than the lifetime expenses estimate! But you can make up the difference through investing, if you plan wisely.

Getting a handle on your future money needs will allow you to gauge how much you'll need to put away each month in order to achieve your short, medium and long-range goals. It will also help you to choose the appropriate mix of investments to meet your goals. Generally speaking, it is usually wise to choose lower-risk investments for shorter-term goals. For example, if you plan to buy a new car next year, you probably shouldn't put all of your savings for that car into highly volatile oil futures. If you did, there is a chance that you could double your money quickly, but there is just as good a chance that your money could suddenly evaporate right when you need it. One year definitely falls within the short-term time frame, and safe investments like Certificates of Deposit are usually best in such cases.

Musicians may have one advantage over the rest of the population in terms of investment goals. Many of us actually love our jobs, and don't necessarily want to retire young. The longer you keep working, the less ambitious you will have to be with your retirement savings goal. On the other hand, some musicians have their peak earning years when they are young, and may be somewhat less able to earn and save substantial money later in life, even if they decide to keep working. It can be difficult to predict your future money needs precisely, but you will certainly need some money! Try to estimate as realistically as you can, reevaluate your plans from time to time, and save accordingly so that you aren't caught shorthanded when those expenses arise.