Budgeting for Piano Teachers - huh?
When you hear that word, how does it make you feel? If you're like me, for many years, that word made me cringe. It hinted of restriction and obligations. It made me feel like I was constantly about to get in trouble.
But, that all changed when I learned what a good budget is.
Now, I see a budget as freeing and stability. I see a budget as playing with my money and having fun.
Pretty radical, huh?
Most of the time, when I talk to piano teachers about budgets, they nod, and agree with me that budgets are really important. They agree that figuring out how much money to spend on groceries or to allocate for their kid's summer camp is good stuff.
Interestingly, when I take it a step further and talk about how they need to have a budget for their piano lesson business, I often get the following response:
And then "No, um, no, you see, I don't make that much money."
Literally, those three things. Every. Single. Time.
You see, when we are dealing with an overall household budget of, for example, $3000 a month, we understand that, yeah, we should probably have a budget to determine what happens to that money.
But when we see our piano lessons bringing in only $300, that number feels like it is too small to warrant a budget.
Dangerous thinking my friend. In fact, that kind of thinking is exactly what will KEEP you earning only $300.
Here's why: as famed money guru (and my financial hero) Dave Ramsey says: "A budget is telling your money where it should go."
If you don't tell your $300 where to go, guess what? It will go places you neither intended nor will remember.
Think about it. How many times have you used a $20 bill to pay for something and ended up with $17 left in your pocket or in the bottom of your purse. Over the course of the next few days or next few weeks, that $17 dollars gets spent on lots of different little things that you don't even remember.
You remembered using the $20, but you don't remember all of the other little purchases and all of a sudden, you are digging in your purse for the left over money and its gone.
That's because you didn't tell it where to go.
And when you tell your money where to go, it wonderfully obeys you and you end up having more of it instead of wondering what happened.
I can hear your objection now, however. You're thinking "but my piano lesson income is variable. I don't know how much I'm making each month -- how can I budget that?"
Well, you're right. That makes it very difficult to budget with variable income. I have two answers for you:
1. Budget anyway.
2. Make sure your income is not variable.
Here is how you budget anyway: think in broad strokes of percentages. Where you want your money to go as a proportion to your income.
That way, if you make $300 this month you still are sending the same proportion to savings and still taking home the same proportion as you would if you made $2500 this month.
I'm not a financial guru like Dave Ramsey, but I can tell you that in my business, these are my proportions:
10% Tithe (charitable giving - very important to me)
10% Savings (for the business -- future expenses or income loss)
25% Taxes (so very important to set this aside)
15% Business expenses (ink, books, web hosting, etc.)
40% Take Home Income
Now you might be thinking two different things right now: Wait, does that add up to 100%? You're funny, I just pulled out my calculator, and I assure you that it does.
The next thing you are thinking is this: Wait, you are only taking home 40% of what you earned?
Yes, I am. And chances are, if you are setting aside taxes money and saving some and giving some, after your expenses, you too are only taking home 40%.
That's a bit of a shock, I know. As piano teachers, we get giddy when we think about how much money we are making. We take our lesson fee, and multiply it by the number of students we have and think we are making that much money! Yahoo!
As fun as that simplistic multiplication game is (I do it too, sigh), it is a mind trick that is actually pretty unwise. Because we're not actually making that much money. We might be earning it, but we're only making what we take home. That's why your budget is so important.
You see if you don't budget for savings in your business, one of these days, your printer is going to sing its final song, and you are going to have to buy a new one. Where does that come from? Your take home income, so guess what, you made WAY less this month.
And if you don't set aside money for taxes, come April 15 (for those of you living in the good ole USA), you are going to be in a world of hurt because all of a sudden you owe ALOT of money to Uncle Sam and you don't have it. That month (and probably several upcoming) you will have made no money. Zero. Zilch. Nada.
So, I know that it is way more fun to think about how much we make per lesson, but it is way more important that we have a budget so we know exactly how much we are making per lesson. That budget also helps us determine how much to spend in other areas of our business.
Now, that other part about variable income? Here's some gentle, but straightforward advice: you can change that, you just haven't been brave enough to. You can make your income steady and the same each and every month without going through the monthly wondering of how much you are going to make.
The way to make sure your income is steady and ensure that you can expect a certain amount each month is to make sure you have STRONG policies in place with regard to tuition. I can tell you that I know exactly how much money I make each month because my policies are so firm. I don't know about you, but I don't ever want to have to wonder how much money I'm going to make. My kids drink GALLONS of milk -- I want to know I have the money to pay for it!
It is virtually impossible to run a healthy business, much less your own household, without knowing how much money you are going to make and working through the step by step resource "Crafting Piano Lesson Policies" can help you do just that. A couple of hours in one afternoon and you could have an AWESOME Piano Lesson Policy document for your own studio. Check out the resource here: Crafting Piano Lesson Policies: A Step by Step Guide.
So, dear Piano Teacher Friend, go do it. Go take the plunge and write up a budget. Think through what your proportions should be. Firm up your policies so you can count on a monthly income.
Budget, budget, budget. Follow it. You'll be glad you did.