Personal Finance for Creatives.
Here are three things you should keep in mind as a journeyman creative professional.
1) Buy a cheap house.
We are now at the point where my wife and I get paid something equivalent to the median salary in our area when we do arty things. I get paid a few thousand dollars for my work on independent film projects, and another few thousand for my university adjuncting. Its not a bad amount of money, compared to my cube-dwelling gig.. but it does not come as regularly. While we do not live in a gypsy wagon.. our house is embarrassingly modest – and (here’s the kicker) obnoxiously cheap. Our income fluctuates, but our mortgage payment is between 10% and 30% of our income.
2) do not take loans for a graduate degree. (MFA in anything; from anywhere).
I paid 30k cash for my masters degree from a 2nd tier graduate program by waiting tables. I would not be where I am without the degree, but I wouldn’t be able to freelance if I had that as a loan to repay. I know of a few MFA students who have paid their way with Etsy shops. I’m a fan. Bartending isn’t bad, either. Now, if there is some UBER competitive/IvyLeague/God’s-gift-to-the-world program and you managed to slaughter the jury with your outstanding work and the 30-ounces-of-unicorn-tears admission fee… Good god, man, GO! But go like people went to college in the 50s: go with a part-time job, sleeping in an el cheapo apartment, and learn to bartend or shoot weddings. An MFA in theatre from Yale is worth the price of admission for the connections and pedigree…but put some of that network to WORK while you are there can to keep from having to take loans. Those professors have friends, and those friends need staff. You need a network and a paycheck…why take a loan when you could be working in your industry?
3) Get a month ahead on your personal finances.
As in, what comes in this month will be spent next month. This way, if nothing comes in, you have four weeks to find the cash to pay your mortgage. We started this when we got some cash for our wedding, and it’s been a life saver.
4) don’t count project money until the buggers pay you.
I used to orchestrate a church musical every spring. I liked the work, and the money was okay, I just never exactly knew when the check was going to be in my mailbox. On more than one occasion, I would start spending “the check” after my contact told me he’d requested it…and more than once the check was still 6 weeks away. That’s way too much stress, and leads to bad decision-making.
5) keep your project money separate from your household money.
Even if you have to feed your baby $1000 a month for years, keep them apart. Or the week you dip into savings to buy new software, will be the same week your car dies. It’s important to know if your business account has 100k in it. It’s important to know if it has $0 in it. And neither of those scenarios should have any bearing on the checking account you use to buy groceries.
6) You need retirement.
Planning to hit it big in your field and then cash out… is not a retirement plan. A Roth IRA is a retirement plan. Did you know your small business can contribute to your retirement (and the business gets a tax write off?) It’s called a SEP IRA, or “Self Employed IRA.” You can set one up with Vanguard pretty easily, and while its not the most-common kind of retirement account.. its a neat way lower your 1099 tax burden AND have some of the benefits of a Roth IRA. JUST like you would have if you worked for a larger company that contributed to employee retirements. Because YOU are the owner of a small company, and YOU work for a small company.
7) You need a rainy day/emergency fund.
You absolutely cannot do your best work living hand-to-mouth. It’s common, I know, but so is drug addiction among rock stars. That doesn’t make it a good idea. You’ll be around longer and able to make better decisions if you have 6mos worth of expenses at hand at all times. 1 – 2 years worth is not unreasonable if you freelance. Put it in a money market account attached to a debit card. This way, when an exploitative schemer is the only guy calling you for work, you can say what you really feel. Imagine what it feels like to be able to say no to a terrible opportunity and know you aren’t jeopardizing your households short-term needs.
8) You may need to build a backstop.
Uber. Lyft. Airbnb. Flipping houses. Renting houses… No one says you can’t be a _________. But in some markets, additional income is necessary. And thanks to the internet, additional income is available that is not tied to a desk and a set schedule. I know a touring musician that bought a duplex to rent out as part of his plan to quit his job. I know a web guy who did the same thing. A film composer I know flips houses. None of them talk much about it. But it is such a wise thing to do.
Being a professional creative isn’t all about money, its about freedom and doing great work. But not paying any attention to it is a great way to wind up back at the cube farm. I don’t care if you flip houses in between tours, or buy a duplex to rent so that your cash-flow evens out, lots of my peers do these things and don’t tell their clients about it.