money as you're telling them you make, and
that you're going to make it next year too "
Of course, there are no guarantees for
freelance musicians that they'll earn the
same money from one week to the next, let
alone from one year to another "Were pretty
good with our money " Denn admits. "We re
good at saving money Wte don't try to save a
certain percent each month because our
income varies so much, trtte can make a
couple ot thousand one month, and a
thousand next month.
"It does make it a little harder to plan for
expenses. Vbu have to be prepared Kru have
to save. I guess there’s more motivation for
us. because if we don't get work one month
we really need to have something in the
bank, ft’s really important for us to have
money set aside that we can live on for a
while If one of us gets hurt so that we couldn't
play for a while, we'd be stuck."
Despite the impact an injury would have
on their cash flow, the Denns carry no
disability insurance. "We just protect our
selves against major medical and that's it,"
Denn says "It's real hard to get insurance
when you're self-employed To get any kind
of a good deal is hard. When you 're hired by
a good company they'll have group plans for
you, but we can't get into any group plans."
Denn tells those on a fluctuating income
to seek the advice of an accountant Because
they work out ot the house, the Denns can
deduct household expenses such as their
telephone and electricity bills, and portions
of their mortgage payments. "An accountant
can save you a lot of money it you're
independent," Denn says.
A WORD ABOUT
INSURANCE
You'll probably want to consider
several different types of insurance
when you’re starting out, both to
hedge your bets against the unexpected
and to take advantage of the lower premi
ums often offered to young adults.
Most employers will offer some type of
medical coverage as part of a basic
employee benefits plan. If you find the
coverage inadequate to your anticipated
needs, you should certainly seek out
additional plans on an individual basis. In
most parts of the country, there are com
munity health plans to help defray the cost
of medical care; group plans also trim the
financial burden of individual health cover
age If you work on your own, or on a
freelance basis, you'll find many profes
sional organizations offer health insurance
plans at rates significantly less than you'll
have to pay on your own.
Chances are your company will also
provide some type of disability insurance,
offering compensation if you are injured on
the job; many companies will assess a
modest premium against your salary
towards such coverage, at your option
Depending on the poticy. disability insur
ance will often cover accidents that take
place commuting to and from work. If you
can part with whatever premium payments
you're called on to make (usually no more
than a dollar or two per pay period), it’s a
good idea to opt for such coverage Again,
if you're on your own. you’ll have to seek out
individual or group plans suited to your
needs, the cost may be higher than for your
salaried colleagues, but if an injury ever
inhibits you from earning an income you'll
want to be sure you're covered
“Disability insurance is probably the
most important coverage for a young worker
just starting out," counsels IDS's Madden.
“I tell my clients all the time, 'If you can't
afford to be out of work, and an accident
can keep you out of work, then you can’t
afford to be without disability.' It's as simple
as that."
Homeowner's insurance is an unfortu
nately-termed type of coverage you should
certainly consider Policies are available to
renters as well as owners; as a renter, you’re
insuring your property within your house or
apartment, and not the dwelling itself Rates
are assessed on a sliding scale, depending
on how much coverage you seek
Most graduating students, particularly
single students with no dependents, will
think twice before electing life insurance
coverage. The prevailing wisdom has been
to avoid such coverage unless your sudden
death would leave a beneficiary in true
financial need You might, however, want to
take advantage of the low premium pay
ments offered to young adult policy holders
in good health; you can start slow, with
minimum coverage, and strengthen the
policy later on. as your life insurance needs
change (In our next installment, on invest
ing, we’ll explain why certain kinds of life
insurance policies are among the best
investments available to recent graduates.)
There is such a thing as over-insuring
yourself against the untikeliest of disasters
and casualties, you'll have to determine
both your realistic needs and your ability
to meet the payments for whatever cover
age you select
CREDIT
Despite reports to the contrary it's
not always a good idea to borrow
money simply to establish a good
credit rating "You hear that old advice"
agrees Georgetown University's Drome, "but
you're going to find out in the ordinary
course of starting out that there will be thii igs
for which you'll have to go into debt You
can build a good credit rating as a natural
by-product"
A good credit rating can be yours if you
pay your bills on time, plain and simple
When you go to a bank or lending institution
for a loan, the lender looks at your age.
current job and work experience, net worth
(your assets, less your liabilities), and your
expenses to help determine whether or not
you'll be able to pay back the loan (or
service the debt).
"If you have six or eight credit cards.”
cautions IDS’s Madden, "you're liable to
jeopardize the loan You d>n’t want to send
a signal to the bank by telling them, 'Okay, if
I can't meet my payments from one credit
card company, I’ve got all these others that
will also extend me credit."'
One way to avoid the credit trap is to
use a charge card that requires payment in
full every month Madden advises his clients
that "a card like an American Express Card
prevents you from accumulating any un
necessary debt You may qualify for a dozen
different cards, but that doesn't mean you
should take them.”
You might also want to consider
obtaining a retail charge card at a major
local outlet-a department store, for exam
ple-to help you make payments on major
purchases
Under no circumstances should you
let your bills accumulate beyond the dates