Do You Need Financial Planning For Teaching Music?
Pensions, mortgages, insurance… Independent Financial Advisor John Jones explains that you can’t afford to ignore these things when teaching piano.
It’s a great life being a music teacher. Teaching at a handful of schools a few days a week, private pupils at home most evenings and some regular weekend gigs to keep your hand in. Once you get established and have a regular clientele, the money’s not bad either. Most satisfying of all, there’s none of that 9 to 5 and bossy employer nonsense. Unfortunately, the other side of coin is that (as a non-employee) there’s also no cushy company pension or health care scheme.
Old age and retirement may now seem a long way off, but just think about it for a moment – if you’re not in a company pension do you really expect the state to support you, right through your old age, in the style and comfort to which you’ve become accustomed? Investing in a personal pension is one of the best forms of long term savings – to help ensure financial security when old age inevitably creeps up and when the piano or keyboard is finally laid to rest. Your accountant will confirm the tax-saving advantages of a personal pension, and an Independent Financial Adviser can let you know which company offers the best deal for your circumstances and which can be flexible enough to adapt to the highs and lows of your musical teaching career.
All self-employed persons should also consider Critical Illness Protection whereby, in the event of being diagnosed as having any major critical illness, which would prevent you from working, then the policy would pay out a lump sum which would relieve the financial pressures at such a time. Also, given the time delay with NHS waiting lists, private health insurance is worth looking into. This may seem a luxury expenditure, but just think how much you might lose in tuition fees if you fell ill and had to wait months to get an operation. Health care insurance rates vary depending upon the level of cover, but a basic policy can start from as little as £20 per month.
Being self-employed can be a great asset in relation to taxation, as this status allows you legitimately to write off your expenses and costs in order to reduce your profits and tax bill. However, the problem then comes when you need to apply for a mortgage or try to arrange a pension plan for future needs. All too often high street lenders standard terms and conditions mean that it’s impossible, without having three years audited accounts showing an adequate after tax profit, to borrow enough to buy the property you like.
One answer is to get in touch with a good Independent Financial Adviser who has experience in dealing with the needs of the self-employed and who knows just which lenders will be sympathetic to an application from a self-employed musician or private tutor. Some lenders, particularly if approached via an established intermediary, even offer mortgages which require no proof of income at surprisingly good rates of interest. We’re not talking about dodgy or shady deals – simply about reputable building societies and other lenders who understand the special circumstances of the self employed and who can be amenable providing your application is packaged in the correct way.
Beware: some ‘financial advisors’ are employed by, and therefore tied to, one company – so you can hardly expect them to give totally impartial advice. Independent Financial Advisors (IFA) are, as their name suggest, totally independent – and have access to numerous lenders.
If you’re thinking ‘none of this really applies to me – I don’t want to buy a house and I’m far too healthy to fall ill’, well you may be right. But I would be worried about any self-employed person ignoring the need for a personal pension plan. You can’t prevent yourself getting older, but you can take action now to prevent yourself being poor in your old age. Maybe it’s time to start planning for the future.