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Smart spending: 5 things you should be doing with your money.

Financial planning for dancers usually runs along the lines of "How to live on pennies a day." But what about when you begin to earn a steadier income? Whether you're patching together several jobs or have landed a full-time position, you should develop a financial strategy.

Budgeting may seem dour, even daunting. But a realistic plan will prove invaluable-particularly when you hit hurdles no dancer likes to think about: unemployment and injury. "Our profession is fleeting. One day you could be healthy, the next day you could have a torn ACL," says Ariana DeBose, who was recently in Broadway's Motown: The Musical. "You have to be proactive."

Health insurance should be number one on your list of expenses. If you do get injured, it will ease the financial pain. DeBose gets hers through a performers' union-she's a member of SAG-AFTRA and the Actors' Equity Association. Freelancers also have options-many more with the Affordable Care Act (see "Your Body, Your Health Care," page 116). But there are other priorities, too. From setting aside money for taxes and retirement to spending wisely on daily expenses like rent and classes, planning carefully will help you make the most of your income.

(1) Develop a Savings Plan

As a freelancer, it's common to face extended breaks between gigs. In these situations, a rainy day account can be a huge help. As a general rule of thumb, Las Vegas-based financial consultant Jessica Scheitler recommends that most people have enough squirreled away to cover at least six months' expenses. But each individual's needs are different.

When DeBose was building her savings, she used the six-month guideline (plus a little cushion), which put her goal at $20,000. That figure may be overwhelming- especially if you've just started working. But saving doesn't happen all at once. DeBose says she put aside one third to hall of her weekly paycheck until she met her goal.

Kristen Klein, choreographer and artistic director of Inclined Dance Project, saves a more modest sum, about 10 percent of her income. The amount is up to you, but the goal is the same. "Everybody wants some sort of stability," Klein says. "It's a way to feel safe."

(2) Account for Taxes

For freelance dancers, tax season can be especially stressful. If your paychecks don't have taxes withheld, you may owe a balance on April 15-which often comes as a shock. Setting aside some of your untaxed income will lessen the blow; Limon Dance Company member Logan Frances Kruger says she tries to earmark a third of her 1099 income for taxes. And if you owe taxes one year, you may be required to make quarterly estimated payments the following year-another cost to plan for.

Whether you're a full-time employee or a freelancer, it's also important to understand tax deductions. "Anything that's helping you advance your career is going to be deductible," Scheitler says. That may include everything from dance classes to headshots. But you have to be able to prove these, so organized records--receipts and bank statements--are a must.

(3) Pay for Continuing Education

Although investing in developing new skills early in your dance career may seem unnecessary, it will help you in the long run. When Kruger was freelancing, she worked the front desk at a Pilates studio. The position allowed her to take teacher-training classes at a discount and practice on the studio equipment for free. "It was completely strategic," she says. Not only did she build a valuable skill set that can provide financial support during a career change, she uses Pilates to keep in shape when she's touring or unable to take class. Plus, Kruger was able to deduct her Pilates training on her taxes.

(4) Plan for Retirement

With your career just hitting its stride, retirement may be the last thing on your mind. But the earlier you start contributing to a fund, the easier it is to save slowly and steadily. Opening a retirement account will help keep you on track: You can take money out of a savings account at any time, but retirement funds won't be touched for decades. (Withdrawing money early almost always incurs penalties.)

If you have a full-time employer, you may be able to open a 401(k) retirement fund. All Pacific Northwest Ballet dancers, for instance, are offered a 401(k) option in their contract, negotiated by AGMA. One facet of their agreement is a company match; if a dancer puts money into her retirement fund, PNB matches her contribution.

If you're a freelancer, the most common option is an Individual Retirement Account (IRA). There are two main types, Roth and traditional, with significant differences. Do your research before making any investment-whether that's talking with financial professionals, researching online or reaching out to friends and family.

(5) Spend to Save

After living on so little for so long, you'll want to enjoy your influx of cash. Rather than completely altering your lifestyle (and your budget), remember that small luxuries can go a long way. Kruger has been able to save and invest without sacrificing creature comforts. One frugal choice: She cooks most of her meals at home. But she treats herself to indulgent items, like truffle oil. And rather than buying the cheapest bottle of wine, she now splurges on a $10 bottle-sipped out of a nice wine glass. "Little things like that are worth it," she says. "They help you stick to your plan and goals."

Katie Rolnick is a freelance writer and TV producer based in New York City.
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Title Annotation:take 5 for your career
Author:Rolnick, Katie
Publication:Dance Magazine
Geographic Code:1USA
Date:Jan 1, 2014
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