For many people, a sudden influx of wealth can come with the unexpected challenge of learning how to manage it properly. It's an obstacle Grammy-winning actor, singer and songwriter Anthony Ramos faced during his time in the cast of the hit Broadway musical "Hamilton."
Ramos was one of the show's original cast members, playing the dual roles of John Laurens and Phillip Hamilton. When the musical began off-Broadway, he only made around $420 a week from the gig, he told host Vivian Tu on a recent episode of SoFi's Richer Lives podcast.
"Getting that first paycheck was great because I was getting paid to do something again, to do something I loved, but I was still struggling in New York," Ramos said.
In 2015, the production debuted on Broadway, which came with a substantial pay bump. However, Ramos soon realized how expenses like taxes and manager and agent fees could quickly chip away at his earnings.
"If you're an ensemble member, you're probably making $1,800 a week and then you get taxed on that," he said. "Then 10% to the agent, 10% to the manager."
On top of that, Ramos started spending more as his income increased. "I thought I was way better with money than I actually was," he said. "But I think the more money I made, the worse I got with money."
Ramos' wake-up call
Money Report
Ramos eventually hired a business manager to help him manage his finances. His "epiphany moment" came when he told her he wanted to go on a vacation to Hawaii. Initially, his business manager said he had the money to take the trip, but after just a few weeks of overspending, she let Ramos know he would no longer be able to afford it.
"That was something I was looking forward to and now I can't do it," he said. "I don't want to feel like I can't do a thing because I was irresponsible."
The experience taught Ramos a valuable lesson: It's OK to seek out help with managing your money, especially if you realize you're not good at it on your own.
He says his business manager helped him gain a clear understanding of his finances and taught him to avoid spending money he hadn't earned yet from upcoming gigs.
That's a strategy anyone can implement, no matter if they're earning a consistent paycheck from a 9-to-5 job or inconsistent income from gig work, he said.
One strategy for improving your money skills
You don't need to be a rich celebrity to sharpen your money management skills. The key to getting started is to get a clear picture of how much you're spending, compared with how much you're earning.
One way to begin is by implementing self-made millionaire Ramit Sethi's "conscious spending" plan. With this strategy, you divide your spending into four categories:
- Fixed costs: Rent, mortgage, utility bills, student loan payments
- Savings: Emergency fund and money for large purchases or future vacations
- Investments: 401(k) or Roth IRA contributions
- "Guilt-free spending": Dining out, shopping, splurges
By divvying up your money this way, you take care of your financial priorities first, which leaves the rest of your income for things you love, Sethi says.
Plus, once you've got an idea of how you're spending your money, you can make necessary adjustments to meet your financial goals, a sentiment Ramos echoed on the podcast.
"You've got to look at what you've got. What do I have right now? How can I make the most of it?" Ramos said. "Everything feels like a bonus when you're literally focusing in on what you got."
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