THE PROBLEM (surprise, it's not unnecessarily your fault)
We may all be mired in our own unique situations, but through the years that I've been talking to artists about their money I've come across the same struggle over and over again. We're not the same – but we're not alone. And there are issues that many artists and creative professionals have in common which set-us apart financially from our 9 to 5 neighbors.
If we buy into the stereotype, the problem is that we're just inherently capable of dealing with something as dry and suspicious as money. I, however, believe the opposite is true – but I'll get to that in a future post.
What I'm talking about is a problem that every freelancer, gallery artist, creative entrepreneur, as well as anyone who cobbles together a living from multiple streams of income, a collection of clients, or a variety of odd-ball projects has had to contend with at some point in their career – if not on an ongoing monthly basis. You might be making good money, or you may be just getting by, but either way you're dealing a serious impediment to saving and planning, which is: if you do not get a steady paycheck, you may not know from month to month or year to year how much money you're going to make. And if you do not know how much money you're going to make, it's hard to save and plan for the future.
When I first got interested in learning how to deal with my money I did what many people do – I went to the book store and picked up the first book I could find about personal finance, opened it to page one and read, “Because you receive a regular paycheck, you can yada-yada-yada … “. Since I did not (and still do not) get a regular paycheck I put that one down and picked up another and read “Make sure to direct deposit your regular paycheck into your bank account so you can, blah-blah-blah. .. “, I put that one down, and picked up another, and quickly found that all the books written on personal finance say the same thing! They make the assumption that you receive a regular paycheck, and the rest of the advice about saving, planning and investing hinges on that being in place. Many of us at this point would toss the books in the air and run screaming, having confirmed that indeed there is no instruction manual for someone with a fluctuation income.
But I read those books, and about a hundred more. To get deeper, I started taking financing classes with the goal of answering the question: How do you plan for the future if you do not know how much money you're going to make?
The easiest thing to do, and what many of us have done for long stretches of our career is … nothing.
We may be paying our bills on time, keeping up with our student loan payments, and hopefully even staying out of credit card debt – and that feels good . It feels responsible, like we're keeping our sh * t together, and living like adults. And when you do not know what you can expect to come in a month or two down the road, it feels safer to leave the check you got today in your checking account to wait for future bills. It may even feel irresponsible to sock some portion of that money away, when you might need to fill an unexpected lull. And this is precisely what makes it so hard to plan for anything farther away from the current month.
For years my financial planning was supervised of keeping a mental tally of expected checks and future work, ticking-off this month's bills, then next month, and inevitably funneling my money towards the noisiest expenses without any thoughts of the future. But the dangers of this scenario are threefold:
1. If you store all your money in a place where it's easy to spend – you're likely to spend it. It's as simple as that. When you have not moved your saving out of reach, it's too easy to let your expenses expand to include all the money you have on hand. Financial gurus are constantly touting the benefit of paying yourself first, by putting away a percentage of your income before you've had time to realize it's there. This allows you to live below your means without having to constantly exercise restraint. For people with a fluctuation income, however, this is a big leap of faith, and it's a practice that is all too easy to skip. There's always something that needs buying, so if you keep your extra money in the same place as your spending money, you'll quickly lose track of it.
2. You are not giving your self access to the most powerful investment tool in the universe: Time. Time can make up for so much – if you use it. Time can turn a small investment into a large investment. It can smooth over the day-to-day volatility of something as uncertain as the stock market, making a risky investment less risky. And it does this all by itself, without you having to pull the levers to make it happen – you just have to get started, and give time a chance.
3. You're not creating good saving habits. I spent years of my early career putting away saving, using all the cliche excuses: I do not have enough income, I'm investing in my personal growth and career instead, I do not know what to do with it anyway – so what's the point … But all this did was delay creating good money habits. However, once started – good money habits build on themselves, and after a few months, and then years of maintaining them, you'll find that you've taken the hardship out of saving, and given yourself real assets that you can use to stabilize your life and your art practice.
If not knowing how much money you're going to make has gotten in the way of your ability to save and plan for the future, then you're not alone. In my opinion, this issue is one of culture's biggest enemies. This is the reason many of us stop being artists. And it has nothing to do with being flaky around money, and everything to do with the uncertainties inherent in our field. If you've lived for years on the thin margins of living paycheck to paycheck, without creating a stockpile of savings, you leave yourself vulnerable to unexpected set-backs, inflation, aging and a million other things that are inevitable. And it does not take long, once you've gotten behind, to start looking outside your art practice to make ends meet.
But do not fear! I've spent a lot of time thinking about this problem, read everything I could find on the subject, and through my own trial and error I've collected straightforward strategies that you can start using right away. You can check them out at http://www.sm-artly.com .