To all of those working in the arts having trouble with personal finance, lend me your ears!  For I have a special article just for you, and I hope I can captivate you long enough to drive a few points into your beautiful, artistic, brains.

You see, I am a bit jealous of many of you.  Musically, I am a sub-par guitar and harmonica player.  I can’t draw a straight line, I’m awful with colors and can’t paint, I do some great Michael Jackson dancing, but I am terrible with choreography.  Maybe I am OK when it comes to acting. (Take a look at my YouTube video and judge for yourself 😉 )

What I am trying to say is, I have a whole lot of respect for you, and I am envious of you.

You make our lives more vibrant, you entertain us, you create experiences releasing happy endorphins in our brains.  Without you, our world would be a gray, music-less, gloomy, landscape.  This article is a present for you (suggested by my friend Katie).  I hope you gain some knowledge and motivation from it.

This is my attempt to pass on some wisdom and it is written for those unfamiliar with personal finance.  I am writing this while picturing someone who, at the mere mention of the word 401k, tends to vomit.

We will go over the financial hurdles facing artists, some tips on financial management, budgeting, savings and debt.  We will touch on investing and taxes, then we will end with a few ideas to help bring some extra money into your pocket, as well as ways to use technology to improve your finances.

Let’s get our personal finance on!

Financial Management

arts and personal finance for artists

Three problems facing the artist

Many of you are struggling in different ways, and I know many of you, while you have received incredible training in your craft, have not received much training in the world of personal finance.

I want you to understand something.  Most people know very little about personal finance; it is not just a problem for those in the arts.

There are, however, three huge differences between those earning a living in the arts, and those who are not:

  1. Your income fluctuates more than those working in the corporate world.
  2. You don’t receive benefits from your employer like those working for corporations and other small businesses.
  3. Many of you work a lower paying job (or jobs) to help you as you pursue your careers as artists.

I believe the largest problem facing many of you is the fact that you don’t know how much money is coming in each month.  How can you save for your future, when you don’t know if you can pay your bills next week?

Many of you also have part-time jobs to bring in enough to get by as you pursue your passions, but they may not pay enough to live in the high standard of living cities you tend to live in.

When it comes to personal finance, you are at a disadvantage to those who both have a known income, and have benefits through their employer.  Many of you also tend to be less inclined to care about personal finance.  This creates an unfortunate, double whammy.

Financial management is more important for you

In many ways, saving and investing is even more important for those of you working in the arts.  Many employees of companies have money placed in a retirement account for them, or receive a match for money they save.  They may have support from a representative to help them with their company retirement plan.  They also have an insurance person and an hr person.  They have much more support than you do.

Yet, it is more important for you to manage your finances properly, because your finances likely fluctuate drastically in comparison to those who have jobs and the support of their employer benefits.

Budgeting –You need a budget even more than most people

personal finance and the arts

“If all the year were playing holidays, to sport would be as tedious as to work.”

-Shakespeare

We can take something away from Shakespeare.  Not every day is supposed to be easy; some days we must do the things we do not like.  I know when many of you hear the word budget, you envision punching me in the face.  However, it really is important for someone with unknown income have a budget. Because your earnings fluctuate more than most, you need a budget more than most.

I get it, it’s a pain in the ass to sit down and write down all your expenses.  It may even depress you to know how much you spend each month.  But, that is no excuse to not have a budget.  A budget can help you manage your income, and it will allow you to know exactly how much you need each month to pay your expenses.

If you are on Pinterest, you can head over to my Pinterest profile and look at my budget printables board.

The envelope system

The envelope system is a great low tech budgeting system.  It involves adding cash to envelopes foryour week or month and only using the cash inside the envelopes.  As long as you don’t spend more than is in the envelopes, you stay within budget!

Read this article about how I personally have used the envelope budget: Why the Envelope System Is the Best Budget to Save

 A budget begets savings

When you have a budget, you have a guide.

Each month, you will know the amount of money you need to bring in.  If you don’t know your expenses, you will have no idea how much you need to earn.

Your budget allows you to create goals.  When you create your goals, you include the amount of money you should be saving and investing for the future.

And, hence, your budget begets savings.

Saving and investing

Saving 

No person should have less than 3 months of their expenses in savings as an emergency fund.  Not to beat a dead horse, but if you don’t have a budget, you have no idea what this number is.  Once you have a budget, just multiply your expenses by three and that’s the minimum amount you should have in a bank account.  Whohoo!  Easy math!

I would suggest trying to save up to six months of your expenses in cash.  This will be especially helpful if you have income that fluctuates drastically.  Once you get to the three to six months of expenses in cash, it is time for you to stop adding money to your bank account, and start adding that same amount of money to your investment account.

This article can help you start saving an emergency fund: 5 Unique Ways to Save an Emergency Fund  – AMASS

Investing

You may not have an investment account, so you should set one up.  Below are some options for investing, and I wrote a whole article outlining 11 steps to start investing.  I highly recommend you read it here:  How to Invest in the Stock Market  – 11 Simple Steps for Millennials

Investing is where many people get lost, so we can try to make this simple.  You can invest your money in three different accounts.  Each of these accounts are taxed differently, but the investments available are mostly the same.

  1. Roth IRA (individual retirement account)
    • Limit to how much you can add each year.
    • Money is added to this account AFTER you pay taxes on that money.
    • You pay a penalty if you distribute your profits before age 59 1/2
  2. IRA (individual retirement account)
    • Limit to how much you can add each year
    • Money is added to this account and you receive a tax deduction. So this is considered PRE tax.
    • You pay a penalty if you distribute ANY money before age 59 1/2
    • You pay taxes when you distribute the money in retirement (because you didn’t pay taxes on your income when you added the money).
  3. Account that is not an IRA or Roth IRA
    • You can invest in vehicles such as stocks, bonds, funds etc…
    • No limit to how much you add
    • Money added is AFTER tax
    • You will pay taxes on interest and dividends (unlike a Roth IRA and IRA).
    • You will pay taxes on profits.

So, which account should you use?  That is really depended on your individual situation.  However, if the decision is leading you to a financial, catatonic state, just pick one.  It is far better to invest in one of these than not to invest at all.

What should you invest in?

The arts, artists, and personal finance

If you are not following individual stocks, you can simply invest in index funds or ETFs (exchange traded funds). Index funds track an index, which is a group of different stocks.  The great thing about index funds are the low fees compared to other types of funds.  If you sign up for an Ameritrade account, you may wish to invest in the S&P 500 ETF (here is a link: SPY).  You can easily setup your account, then call the customer service line and ask about investing in these funds.

Once you start investing, this is the most important advice I can give you: don’t sell your fund for a very long time.  You will wake up one morning, and your fund will be down 10%, the following year you will wake up another morning and your fund will be up 20%.  This will repeat over time, but over the long term, you will have far more money if you don’t touch the money you add to the account for 15+ years.

Download an investment app

You can either open a traditional investment account, or you can download an app to help you start investing.  If you are a millennial, an app may be preferrable for you.  These three apps are easy to start with.

  • M1 Finance – great for buying individual stocks and a little more of a do-it-youself investment app and trading is free.
  • Stash – answer some questions about your risk tolerance and this app will invest your money in a portfolio geared towards your risk tolerance.
  • Acorns – this app will actually roundup you spending at the store and automatically add it to to investment funds.

Setting up an investment account

Setting up an investment account is way easier than you probably think.  You can follow these steps to setup an Ameritrade account.  One of the great things about Ameritrade is that it has no account minimum; you can start with $50 if you wish.

  1. Open your account with Ameritrade through this link: Ameritrade Link
  2. Link your bank account to your Ameritrade account.
  3. Schedule a draft so that each month, a specific dollar amount is sent from your bank account to your Ameritrade account.
  4. Choose your investment (I personally suggest the S&P 500 ETF)
  5. Your account will fluctuate every single day.  Remember not to touch it for many years.  As long as you do so, your results should be positive.
  6. If you have trouble navigating how to do any of this, call Ameritrade and they can easily walk you through the steps.

Taxes

If you are not inclined to personal finance, hire an accountant

If you do not know much about personal finance, you should not do your own taxes.  If you make your living in the arts, there is a good chance you are considered a small business owner.  An accountant can help you pay less in taxes.  The expenses you incur working your craft may very well be deductible.  This means you can reduce the amount of your income you pay taxes on, which reduces your taxes.

You probably should know that small businesses can deduct the tax preparation fees as a business.  Even though you will pay for the service, you are able to deduct the fees.  This is just one more reason you should use an accountant.

Of course, a great accountant specializing in small business owners may be able to find you deductions a company like H&R Block doesn’t know about.  It is not uncommon for a great accountant to pay for his or herself.

If you want to go the cheap route, H&R Block will often have discounts available to you if you go to one of their offices.  I would keep an eye out on Groupon for discounts.  You may also want to call your nearest local office and ask about any type of deals they have.  I have known people who receive discounted services during tax season from H&R Block.

If you do not have someone to help you do your taxes, you may be paying more in taxes.

Debt

You may have student loan debt, credit card debt or other loan debt.  If you have debt with a high interest rate (over 7%), you should payoff that debt AFTER you save the minimal 3 months of your expenses needed in savings for an emergency fund.

You may use the steps at the bottom of this page if you need to make additional income to help get yourself out of debt.

Student Loan Debt

If you have student loan debt, you should read my page on student loan debt.

Student loans can be complicated due to the many different loan types.  Some loans have protections and some do not.  I suggest you read my page to learn more about student loan debt.

This is where our financial management section ends.  If you follow the advice above, you should be far better off down the road.

The next section shows you how you can maximize your income and reduce your expenses, as well as technology to help you achieve these goals.

How to maximize income and reduce expenses

Automate the above strategies

You may be able to automate the above saving and investing strategies once you have a budget in place.  To make this easy, you may want to have two different bank accounts with two different banks.  You will send money from one bank account to another bank account, automatically.  This way, you automatically save money each month.

For this to work, you should throw away any debit cards or checks associated with the savings account so you don’t spend the money.  Make sure you include the amount you pay in taxes in the amount budgeted to be saved to the bank account.

Here is an infographic for the process (don’t judge me on my infographic skills!)

Automate Savings

Once savings is automated, link savings account to investment accounts to automate investing

It will look like this in the end

Arts Post Conclusion Personal Finance

If you lack money for your expenses, use the internet and other tools to make additional income

Earn income from your particular skills

You may have certain skills you can monetize on the internet.

Here are a few sites you may be interested in if you are looking to make some extra monthly income:

  1. Upwork – a freelance website where many skills can be monetized.  From writing, to graphic design, to music, Upwork has many different ways to earn some extra money through freelancing.  Click here to take a look: Upwork Link
  2. Fiverr – Fiverr is a website similar to Upwork. If you can create a repeatable task which you can monetize easily and you can complete quickly, you can find work on Fiverr.  For example, you may be an actress who does great voiceovers.  People will hire you on Fiverr to do voiceovers for a fee.  Click here to take a look: Fiverr
  3. Etsy – Many of you have heard of Etsy before. Etsy is an online store allowing you to sell your works on the internet.  For example, my cousin paints and sells her works on Etsy, you can see it here: Etsy Link

Earn income without any experience

  1. Uber and UberEats – If you are short on money after doing your budget, Uber could be the perfect way to make some extra income.  Uber allows you to drive any time of the day; this is great if you need flexibility in your schedule.  Here is an article I wrote about how I made money with Uber: Uber Driver Income Review –  $11,618 Driving for Uber.  You can also read more about driving for uber here: Uber Driver Sign up and UberEats here.
  2. Surveys – you can fill out surveys online to make extra income. I wrote a whole article about this which you can find here:  7 High Quality Companies for Online Surveys to Make Money
  3. Swagbucks – Swagbucks is a rewards side which can allow you to earn gift cards. You can earn gift cards for Paypal which is the equivalent of cash.  I wrote an article about Swagbucks here:  Sagbucks Article
  4. Amazon Mechanical Turk and Clickworker: These are companies you can easily work with to perform microjobs.  There is no experience necessary and you can work at your own pace whenever you wish.  I wrote articles on these companies you can read here:  Clickworker – Is it a legitimate work from home job?, Amazon Mechanical Turk; Is it a viable way to make extra income?.
  5. Start a blog –  There is no guarantee you will make income, but, if you are able to monetize your blog, you may make significant income.  Here is an article about starting a blog: Blogging is Dreaming – Starting a Blog

Here is a complete list of earning extra income posts from Stock Street:

We live in the technological age; use these tools to help you manage your finance better.

An app to help you automatically invest your change

Acorns App ($5 for you when you sign up) – This app automatically invests your change when you make purchases.  It allows you to invest without thinking about it.  Here is a link to an article about the Acorns App: The Acorns App – Get Your Undisciplined Ass to Invest

An app to help you monitor your financial health

Clarity Money – this may be the most technologically savvy app right now when it comes to understanding your financial health.  It will even try to find savings when you link it to your accounts.  Here is the link to Clarity money: Clarity Money Link

Ways to cut expenses

Savvy and Movearoo – These are two companies which can help you save some money on your cable and internet.  You may be able to use them to save some money.  You can use the savings to then save and invest!  Here are the links to BillFixers and Movearoo.  Here is an article I wrote about the two companies: Don’t Want to Cut the Cord? Two Companies Saving You Money on Your Cable and Internet Bills.

You can also read this article about 29 ways to save an extra $4,00 this year.

 

When it comes to personal finance as an artist, I have faith you can make great decisions over time.  This article has a lot of information to help you along your way.

Make sure you get a budget in place.  This will allow you to create a savings and investing strategy.  Follow the steps to set up your investment account so you can start investing for the long-term.

When it comes to taxes, you should hire an accountant to help you potentially save more money on your taxes.

If you manage your debt correctly, it will have a significantly positive impact on your financial future.

Finally, use the companies and ideas provided to help you earn extra income and reduce your expenses.  Take the extra money earned and saved, and use it to payoff debt or add it to savings.

Thanks for reading, and I hope I was able to help!

 

Did I miss anything when it comes to personal finance for artists?  Do you think I am wrong in my approach?  Does anyone have personal stories to help the readers learn more about the benefits of personal finance?

 

Disclaimer: These are the ideas and opinions of the author.  The author is not responsible for the actions of those who read the posts on this blog.  Each individual reader has a unique situation and unique needs.  This blog is not intended to solve those unique situations of the readers.  This blog is not liable for decisions made by the readers of this blog.

You know how websites add a section at the bottom that says, “This post MAY contain affiliate links”?  Well, I am not going to be vague like those websites.  We all know if they write that sentence, the post includes affiliate links.  So, I will tell you straight up that this post DOES include affiliate links.  Use them, I will make a little dough (at no extra cost to you).  Here is my affiliate link disclaimer if you want to read more:  DISCLAIMER

 

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