We're in the Money! Financial Literacy for Actors with Kyle Timson

Written By: Chelsea and Cynthia

Featuring: Kyle Timson

Savings and interest and debt, oh my! We know that financial literacy can be a scary topic, but it's so important for actors to learn how to control their money and feel more secure in such an unpredictable industry. That's why we brought our friend Kyle Timson to the blog today to teach us all about it!

Kyle is an actor and graduate of the University of Michigan, currently touring as the dance captain and male swing on the North American tour of Les Miserables. He's also made it his mission to improve financial literacy in the performing arts industry by providing classes and personal coaching for actors.

We're excited to dive into this important topic with Kyle and allow you to learn from his best advice!

BVC: What does it mean for those in the performing arts industry to have a strong grasp on financial literacy, and what got you started on this path to educating others?

Kyle Timson: To me, it means having a basic understanding of some important financial principles like saving, the best ways to pay off debt, where your money should be, etc.

But I think the problem that's overarching in our society—and also in the performing arts industry—is that we're conditioned from a young age not to talk about money. We go through four years of college training to be professional actors, but the "what do you do when you're making money as a professional actor and how do you prepare for retirement" conversation doesn't come up, because you're young and focused on honing your craft.

When I came out of college, I didn't know anything about any of this. I played Shrek in Shrek The Musical on the International Tour and was making a decent paycheck, but I didn't know anything about finances. When I booked the Les Mis tour at 23, I started hearing questions like, "What do you want your 401k contribution to be?", and people were talking about pensions, and I quickly realized I had no clue what any of that meant.

From there, I started diving in and read a ton of books, did plenty of research, and got my act together. As I've gotten older and become more of a seasoned veteran, I'm seeing people coming out of college and experiencing the same issues I had, so my mission has become making sure everyone is maximizing every last penny they earn, because these jobs are unpredictable, and it pays (literally) to be prepared!

BVC: What's your best advice for actors to get started with taking control of their finances?

KT:

1. Consider where you have your checking and savings accounts. There are a thousand different banks available to you, and I find that most people are using whatever bank is closest to where they grew up. For your checking account, if you love Bank of America or Chase or whoever, that's great, because all your checking account should be is the place your money goes into and goes out from.

My number one thing is, if you have more money sitting in your checking account than what you need to pay your bills, you need to get it out. The reason is that our goal with our money is to beat inflation. Inflation means that the price of everything around us goes up by 3% every year. For example, if you had $10,000 in cash sitting in a shoebox underneath your mattress on January 1st, 2024, then on January 1st, 2025, that $10,000 is only worth $9,700, because it decreases 3% in value.

So when you look at the savings account rates offered to you, the simple question to ask is: Am I beating inflation? What I find is that at the banks with locations on every corner—like Bank of America, Chase, Wells Fargo—their savings rates are extremely low, because they have to pay rent on all those brick-and-mortar locations, so they don’t have as much money left to offer you. But for banks classified as online banks, like Ally or Capital One, they don't necessarily have store locations, so they can offer higher savings rates.

The bottom line is, if you want to keep your checking account with your hometown bank because you feel like you've achieved longevity with them, that's fine—just please don't save your money there.

2. Create an emergency fund. I call this the "Oops, I wasn't expecting that" fund. Things come up in all stages of life—whether you're working a survival job, you're on a national tour, or you're on Broadway. An emergency fund is a savings account at one of the banks mentioned above, where you have enough money set aside so that you can cover an unexpected expense.

The general recommendation for an emergency fund is having enough to cover three to six months of expenses. So look at your rent, utilities, groceries, transportation, etc., for a month and multiply that by three to six. In New York, that can be a huge amount of money, but it's still beneficial to have even just $500 or $1,000 set aside, so that if something like a flat tire happens to you, you won't go bankrupt or put too much on your credit cards.

3. Automate your payments. For all things, whether it be emergency funds, bills, debt payments, or retirement, automating is your friend. Go into your savings account and set up an automatic transfer, so that every Monday, $10 will go out of your checking account and into your emergency fund. Your emergency fund will grow without you even having to touch it. The psychology of money is that if you look at your checking account on Monday to see how much you have for the week, and that extra $10 isn't there, you don't think about it—you won't even know to miss it. But you'll be thankful it's tucked away when you do need it for an emergency.

BVC: When it comes to managing college debt, what are a few best practices?

KT:

1. Always make your minimum payments. If you start getting behind on minimum payments, it ruins your credit, and if you're in a situation where you aren't able to make the minimum payments, it’s time to realize that something's got to change. You need to start working more hours, or find a different living situation with a lower rent. It doesn't matter the solution, the reality is that you have to do something to at least make those minimum payments.

2. Practice one of the two debt payment methodologies.

Debt Avalanche, where you make your minimum payments on all debts, and then every extra dollar goes towards the debt with the highest interest. Let's say you have credit card debt and a student loan payment—the credit card debt is going to cost more money over time because of its higher interest rate, so try and pay that down first. Once it’s paid off, you can take the minimum payment that used to go towards the credit card and put it towards your student loan debt. Then you'll be paying off that loan at a faster rate, because you're paying more than the minimum. You'd continue this process as you pay off each loan, taking that pile of money and dropping it into the next one on the list.

Or, Debt Snowball, where you list your debts from the lowest balance to the highest balance. You'll continue to make your minimum payments on all of them, but you'll put as much of your extra money as you can afford toward the smallest debt first. The psychological reasoning behind it is that seeing that number get lower and closer to zero faster is more encouraging and will inspire you to go on to the next one and keep with it.

BVC: Once actors start making consistent money, is it important to consider contributing to a 401k?

KT: What's so hard about our industry is not only how fleeting it can be, but it’s also hard to see yourself retiring. Yet, at the end of the day, you go to school to become an actor so that you can work and then, someday, retire. It's part of the lineage of society.

From an Equity standpoint, when you're a working actor, the union provides you with a 401k, and then you set your contribution amounts with your employer. The way a 401k works is that you put money into the 401k tax-free, and that money compounds interest until you retire. Compound interest can make a life-changing difference in your retirement, especially if you can get even just a few dollars into something when you're young, as opposed to when you're older.

Let's say you're in Wicked on Broadway, and your paycheck is coming in pre-tax, but we only ever see it in our bank account post-tax. Before they tax it, you can take money out of your paycheck and put it into your 401k, then that money grows for however many years it takes for you to reach age 65. When you pull it out, you do have to pay taxes on it, but because of that compound interest, what you're left with will still be more than where you started.

In a way, this is also a great way to avoid paying more taxes while you're a high earner, because as the amount of money you make per year goes up, your tax bracket changes, and you have to pay more taxes. But you're able to save on some of that by saying, don't tax me at this super high rate right now while I'm making a ton of money, and instead I’ll pay the taxes later when I'm retired and in a lower bracket, since I’m maybe not earning as much.

There's no one-size-fits-all finance solution, but it's important to remain vigilant in assessing and reassessing your situation so you always know where you're at. Financial literacy and confidence are possible—you just have to be willing to start!

If you're interested in diving deeper into the topic of performing arts finances, check out the Broadway Vocal Coach Podcast. You can also find us on Instagram and get involved in the conversation—we’d love to know what you think.

You are also welcome to connect with Kyle personally via DM on Instagram (@kylertimson) or email at [email protected]!

And if you’re a musical theatre performer, but you’re not sure what your next step should be, you’ve come to the right place. Take our Quiz—we can’t wait to hear your story and help you take the next step in your career!