Understanding, Controlling Your Finances As An Artist
As an artist, understanding and effectively managing your finances isn't always something that comes naturally, and is often acquired through a risky trial and error process. It doesn't have to be that way however, and in this piece we look at how to craft a budget based on an understanding of yourself and your values.
Guest post by Suzanne Paulinski from TuneCore
It can be overwhelming for anyone to begin to understand and organize their finances. For creatives, who are already working from a “scarcity mindset” when it comes to money (that voice inside that tells us we can’t have a career doing what we love without struggling and starving for it), it can feel even more debilitating.
Unfortunately, managing our money, as important as it is, is not a skill set we’re always taught in school. It becomes a trial and error skill set that we acquire after bouncing our first check or getting our first “card declined” notice when going to purchase something.
For many of us, we tell ourselves that some people are great with money and that group of people doesn’t include us. We accept that we chose a line of work that will bring us immense joy and satisfaction emotionally, but very little financially unless we have a Fairy God Label swoop in and pay our troubles away.
The reality is you don’t need to struggle to create music as your full-time job. You do, however, need to embrace learning a few key set of skills when it comes to understanding certain business aspects of your career and financial management is one of them.
Even if you decide to hire a financial manager or accountant you will still need to understand the basics in order to make sure the decisions being made about your money are serving your goals properly and effectively.
As Carl Richards, author of the best-selling book The One Page Financial Plan, explains, a budget is simply a reflection of your values. If you can get clear on what you value and keep an eye on how much money is coming in and how much is going out you’ve already fought most of the battle.
Below are three simple steps you can follow to get over the hump when it comes to understanding your finances. But be aware, simple steps can at times still bring with them some emotional pain.
Do your best to take emotion out of the equation by not judging your past decisions when it comes to money. Don’t judge your current self – the one who is taking action to understand their finances – for what your past self – the one who didn’t know any better – did.
Acknowledge and move on.
Knowing ourselves, including our weaknesses, will enable us to make better decisions in the future. The important thing to remember is that our financial snapshot is usually not nearly as bad as we imagine it to be, but if it helps, ask a friend to sit nearby for emotional support and maybe do the exercises together.
Ready? Let’s dig in:
1. ACKNOWLEDGE WHERE YOU ARE
Taking stock of what you spend on average in different areas of your life will provide a map of what you’ve been valuing and allow you to see what areas need fixing.
Here’s a quick outline of what to check:
– What are your fixed monthly costs? (i.e. rent, insurance, subscriptions, etc)
– How much did you spend on variables like food in the last 30 days? 60? 90? Average them to come up with a clear number to aim for each month.
– What are your annually-recurring costs? Divide them each by 12 to find out what you need to set aside monthly for each of them (that way you’re not hit with a large bill you haven’t save for during the month it’s due. Jesse Mecham of You Need a Budget calls these your “True Expenses”)
– Where else have you spent money on a recurring basis that either doesn’t add too much value in your life or is a nonnegotiable when it comes to trimming your costs? This one will be different for everyone. As Pam Capalad of Brunch & Budget always says, that daily cup of coffee and scone at Starbucks may be wasteful to one person but considered a necessity to get through the day that day job they hate for someone else.
2. GET CLEAR ON YOUR VALUES
Take inventory of where you are in your career right now and where it is you want to head. Again, this exercise will look different for everyone depending what their goals are. Is the goal this year to tour? Release new music? Hire a team?
Sure, you may want all of those things but which one is top priority for you at the moment? Do you need to make saving for studio time a priority? Or maybe you need to first build your audience and need to invest in branding and marketing help?
In The One Page Financial Plan, Carl Richards suggests writing your goal at the top of a piece of paper and then your values underneath it. What are you working toward? If you found an extra $100 tomorrow where could that have the most impact? It’s all going to depend on your goals and what you believe is worth your focus.
3. TRACK & ORGANIZE YOUR PLAN
After you’ve taken inventory of what deserves your hard-earned money after your expenses have been taken care of, take the categories and totals you’ve calculated and give yourself a budget using a guided app like You Need A Budget or Mint.
Assign your average spend for each of your categories for the coming month and then as income comes in give EVERY DOLLAR an assignment towards one of your categories.
It takes a village to succeed at anything important you set out to do, so below are additional recommendations to help guide you in your financial management quest:
- Tune into Brunch and Budget’s podcast for more financial literacy training
- Download Qapital for a set-it-and-forget it approach to saving (i.e. move $5 to your savings every time it rains in your area or round up each of your purchases to the nearest dollar and place the change in an travel fund account)
- Download Acorn for basic investing skills
Now matter what, understand that it involves slowing down and taking intentional action to reach your goals, whether they have to do with the creative, collaborative, or financial sides of your career.
Creating regular, small habits and building them into effective routines will have you mastering your money mindset and money management in no time.
Try it out! Let us know in the comments what step you’re up to and if there’s anything else you already do that works when it comes to mastering your money as a creative!