This post originally appeared as part of my new contributing expert series on Backstage.com.  

I’ve heard everyone from freshly unemployed college grads to long-time Broadway veterans bemoan the challenge that is budgeting on an actor’s income.

Whether you’ve grown accustomed to getting by on shoestring savings or a cushy six-figure salary, knowing that days of zero earnings are always just one closing notice or contract end away is enough to induce perpetual anxiety.

The beautiful thing about financial planning is that it can serve to quell the angst that accompanies impending unemployment and fluctuating income, empowering artists and individuals rather than serving as a source of stress. To successfully budget on an actor’s income, those with ever-changing earnings can start by getting grounded in the numbers.

The Make-or-Break Number

How much does is cost to run You, Inc.? This is not the time to be abstract or make estimations. Spend a month or two tracking every penny you spend. Then take a look back at the numbers and strip away the extras, the discretionary expenses unessential to your ability live and work normally—vacations, drinks, dinners out, etc.

Things like your Internet and cellphone bills should be included for the purposes of maintaining your business, but beyond critical lifestyle needs like housing, food, transit, and essential business tools, keep it to the bare bones. Be sure to factor in any mandatory annual costs (divided by 12) and quarterly expenses (divided by 3). Add everything up to find your total bare bones monthly cost of living. This is part one of your make or break number.

Once you’ve established the sum of your monthly necessities, it’s time to build in the add-ons. I’m not talking fun stuff like happy hours and new shoes; I’m talking critical components of maintaining your long-term financial viability.

• Bare bones buffer. Life is almost always more expensive than expected. Add a 10 percent buffer to your bare bones total to keep yourself ahead.
• Debts due. If you have consumer debt, student loans, or any type of additional minimum monthly payments due, incorporate them into your make-or-break number. Falling into delinquency or default can seriously hurt your credit, costing you a whole lot more in the long run.
• Emergency savings. Beyond a budget buffer you need a life buffer—accessible savings for periods of unemployment and unanticipated but inevitable life emergencies (car breakdowns, medical bills, etc.). Another 10 percent of your bare-bones budget designated for monthly emergency fund savings is a solid starting point.
• Long-term savings. Long-term savings should be a non-negotiable part of your financial plan, even if you have to start super small. A commitment to long-term savings builds big picture dreams into your present reality. You can and should increase contributions as you’re able.

By incorporating these four add-ons into your financial plan before adding in any discretionary expenses, you prioritize your financial security and position yourself to avoid the stress of paycheck-to-paycheck living in the long term.

[tweetthis]A commitment to long-term #savings builds big picture #dreams into your present reality. #personalfinance[/tweetthis]

So add up your numbers:

Bare Bones Budget + Buffer + Debts Due + Emergency Savings + Long Term Savings = Make or Break Number

If you find yourself having to choose between any of the above elements—food or insurance premiums, retirement savings or rent, emergency savings or debt payoff, or any other combination thereof —you’ve reached the “break point.” An unfortunate norm when creating an actor budget.

What to Do When You Can’t Meet Your Make-or-Break Number

You can’t spend money you aren’t committed to making. Period.

[tweetthis]You can’t spend #money you aren’t committed to making. Period. #personalfinance[/tweetthis]

The make-or-break number is a guide for keeping you accountable to your financial needs and goals. As such, you have to commit to making at least that amount of money each month. The only exception is when you have several months’ worth of your make-or-break number built up in emergency savings. But even then, you should avoid depleting your entire fiscal safety buffer.

If you find yourself at breaking point, failing to meet the demands of your make-or-break number you have two choices:

1. Reduce your essential cost of living. Examine every line item in your bare-bones budget to see where you can find savings. Can you get another roommate to reduce your rent and monthly utility expenses? Can you consolidate your debt or negotiate a lower interest rate with your lenders? Can you switch to a lower cost cellphone plan to reduce your monthly bill? Remember that even the necessities of life can be renegotiated to be made more affordable.

2. Earn more money. Ask for a raise. Get another job. Start a side hustle. Don’t limit your earning potential or get stuck with the idea that your income is dictated by your employer, your job title, your degree, your experience, or anything else. The biggest driver of how much you can earn is you, so challenge yourself to create a demand around your skill set, artistic and otherwise, and command the value you need in return to live a life on your terms.

What About the Fun Stuff?

I’m all about budgeting in the fun stuff. Treats like Seamless delivery and summer road trips can and should be part of any comprehensive financial plan, but you can’t begin to incorporate those kinds of discretionary spending until you’ve surpassed your make-or-break number.

Before you hand over you hard-earned dollars to Starbucks or your favorite salon, pay yourself first. That’s what the make-or-break number is all about and it’s what will keep you, as an artist on an actor budget, with all your variable income and uncertain employment future, committed to your long-term financial goals and free from the stress of the paycheck-to-paycheck cycle for good.