Guest Blog Post by Anamarie Diaz, The Financial Flutist

For almost all flutists, one of the biggest purchases they make will be a new flute. This is often a decision that is made when you have reached a point in your schooling or career that an upgrade to your current instrument is necessary. However, something that is rarely discussed is the financial responsibility of purchasing a new flute, the financing details you should understand before making the purchase, and the financing options available to you. As flutists, we know that buying a new instrument is an incredibly exciting time, but it is essential that we understand the financial impact that comes with making this large purchase in order to best ensure success in the future.

Financing Responsibly

For the majority of musicians, the conditions in which we will be able to purchase a new instrument is by financing it, or in other words, by taking out a loan. A similar concept to when we take out an auto loan to buy a new car. Few of us have the financial means to pay cash for a new flute, but are in need of a new instrument. So the solution will be to finance it. 

Borrowing money in any capacity is a big responsibility and should only be done once you have a working knowledge of what you can afford on a monthly basis. Here are the basic steps to help you determine what you can responsibly afford:

1. Determine what your monthly household income is. This is the amount of income you make after tax.
2. Divide your monthly expenses into three categories; household expenses, wants/lifestyle expenses, and debt.
3. Add up your monthly debt expenses.
4. Calculate what percentage of your monthly income goes towards debt expenses:

(Monthly Debt ExpensesMonthly Income)100 = X%

The lower the percentage the better. A general rule of thumb is to keep your debt expenses below 36% of your monthly income (if you can keep it around 20%, that’s even better!). If you find that you are paying more than 36% of your monthly income towards debts, it is wise to pay off some debts before taking on any new debt. Taking on too much debt can be a heavy burden on your monthly expenses and lead up to a spiral effect of relying on credit. 

If you find that a small percentage of your monthly income goes towards paying off debt, determine what monthly debt payment you would be comfortable with by plugging in different monthly amounts (like a monthly $200 debt payment etc.). Make sure that with whatever number you are comfortable paying your monthly debt payments stays below that 36% of your total monthly income. Knowing a number that you are comfortable with and can afford paying will be helpful when it comes time to choose a financing option. 

Understanding Financing Details

If you have ever financed something, you know that there is a lot of terminology and fine details that are very important to your decision. Here is a breakdown of important terminology:

• Annual Percentage Rate (APR): The yearly cost of the loan (and how the lender makes money). This rate will include the interest rate and any other charges associated with the loan. The rate is expressed as a percentage.
  
• Principal: The amount of money you agree to borrow.
  
• Fixed Interest Rate: The interest rate remains the same for the duration of the loan.
  
• Variable Interest Rate: The interest rate will fluctuate (based on a benchmark rate specified in the loan agreement) throughout the duration of the loan.
  
• Loan Agreement: The legal contract between you and the lender. This agreement will include information such as, total repayment amount, APR, late charge amount, payment schedule, how to repay your loan, and what happens if you default on  your loan.
  
• Loan Term: The amount of time you have to pay back your loan.
  
• Balloon Payment: A type of loan structure where the last payment is larger than the previous payments.
  
• Same-As-Cash: A financing incentive where no interest is paid on the purchase if specific terms are met.

When you are ready to finance an instrument, it is important to think about the amount of money you are borrowing. The more money you borrow, the more money you have to pay back. Creating a plan to save at least a portion of the overall purchase price will allow you to borrow less money. Consider the monthly payment you will be taking on and if you are able to afford that amount (remember, that additional monthly payment should not push your monthly debt expenses to more than 36% of your monthly income). Lastly, ensure that you are still able to save and contribute to a retirement plan with the additional monthly debt payment.

Financing Options Available from the Flute Center 

The Flute Center is the largest seller of new and used flutes in North America. They offer multiple financing options to flutists to make purchasing a new instrument the most affordable. 

United Midwest Savings Bank

There are multiple options available to flutist through United Midwest Savings Bank (UMSB). Currently Flute Center and UMSB are offering a holiday special of same-as-cash financing for flutes paid in full within 6-month, 12-month, and 24-month. This offer is only available through January 1, 2023. Outside of the holiday special, UMSB offers same-as-cash for all instruments paid in full within 6-months with auto-pay. UMSB has competitive interest rates as low as 12.99%. This is a great option for flutists to purchase a new instrument and save money. 

Apply for financing through United Midwest.

*Remember to read the loan agreement. If the instrument is not paid off in full within the agreed upon time, interest will be charged. Interest accrues for the lifetime of the loan.

Noteworthy Federal Credit Union

Noteworthy Federal Credit Union offers for traditional financing options such as 3-5 year terms at a fixed interest rate. Noteworthy has competitive rates starting at 7%. This is a great option for flutists who are looking for a low monthly payment.

Installment Payments with Shop Pay in partnership with Affirm

With Shop Pay, buyers are able to split up the total balance into equal installments. Shop Pay offers 0% interest with installments of 4 equal bi-weekly payments. Split payments of more that 4 bi-weekly installments can incur an APR of up to 36%. 

The Flute Center of New York works hard to ensure the affordability of their instruments for all flutists by offering these different financing options. For more information on purchasing and financing a flute through the Flute Center, contact them here.

When you are ready to purchase a new instrument remember to run your numbers, consider the monthly payment, and understand the loan agreement.