Many creative people are in a difficult financial situation due to the difficulty of getting paid for their work. So if the financing of your home studio on your credit cards means that your debt has spiralled out of control, you might be tempted to get a new loan to pay off all your credit cards, also known as debt consolidation. Or, if you own a property, you might be looking into refinancing, by using up the equity of your property. Before making any harsh decision, consider the points below.

Before talking about debt consolidation and refinancing, let’s look at whether your debt is manageable or not.

In England, the criteria for a mortage is your annual salary and the value of what you buy. Some banks will agree to a mortgage of five times the value of your annual salary and 95% the value of the property you are buying. On the other hand, in France, the mortgage your bank will agree to is based on your repayments. If your repayments are more than a third of your salary, your mortgage application will be declined.

I live in the UK but i find the french model much better in terms of budgeting. Let’s face it, if half of your salary goes into your mortgage, you haven’t got much left to spend on the basic necessities (food, electricity, heating, transport), let alone on leisure activities, not to mention the little twists and turns life throws at you (plumbing disaster in the kitchen, boiler packing up in the middle of winter, washing machine breaking and so on).

Following the french model, it means that spending more than a third of your income on rent/mortgage would be very hard to manage. Another third of your income should be spent on basic necessities, such as food, water, electricity, heating and things you need to carry out your job (transport, computer etc). The last third should be split in two; you can spend half of it for fun (clothes, going out) and the other half can be saved (to spend on holidays, on furniture, on new windows etc), or used to pay off a debt.

I have almost always followed the above budget principles and the only times i’ve had financial problems were when i didn’t.

Here’s a summary of what your budget should look like, according to these principles:

- 33% on rent or mortgage

- 17% on paying off your debt (or savings for big projects)

- 33% on basic necessities to maintain your day to day life (food, electricity, transport etc)

- 17% on leisure (going out, clothes etc)

 Before jumping straight into debt consolidation and refinancing, ask yourself the following single question: if you managed to save 17% of your income to pay off your debts with, would it be enough to be debt free?

If using 17% of your income to pay off your debts wouldn’t be enough, then debt consolidation might be for you. Your best option is to contact a bunch of different companies and compare what they can do for you, including writing off some of your debts. If you are a home owner, you have the option to go for remortgaging, using the equity in your home.

If however, 17% of your income would be more than enough to put you out of debt over a period of up to five years, then all you have to do is check each area of your spending and see where you are going wrong. If your rent is 60% of your income, it doesn’t matter how cool your place is, you have to let it go.  Likewise, spending 20% of your income on drinks down your local pub isn’t advisable at best of times, let alone when you have debts or want to buy a new electronic drum kit.

I’m no financial adviser, but i find this way of budgeting works for me, and, more importantly, it has worked for a few other people with whom i have shared these simple ideas. So, before running to a debt consolidation company, take a long look at your lifestyle.

Having a home studio comes at a price; maybe it means you cannot afford to dine out every day. So be it. Music makes you happy, right? I know i don’t go on holidays as often as i’d like, but hey, i have some lovely guitars and keyboards, and playing them makes me happy

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