We may all have our own unique situations, but throughout the years that I've been talking to artists about their money, one problem in particular has come up more times than I can count: an artist's fluctuating income. It's something that likely affects every freelancer, gallery artist, and creative entrepreneur -- no matter if they're making good money or just getting by. It's inherent in the nature of the work we've decided to do, and it can create an immediate roadblock to financial stability for our creative class. And guess what? It has nothing to do with being flakey or bad with numbers. If you don't get a steady paycheck, and don't know how much money you'll make from month to month -- it's really hard to set anything aside for the future.
Even if we're able to pay our bills, keep up with student loans, and stay out of credit card debt -- it's not enough if we aren't also building our savings. Why? Because to sustain an art practice over the long term you need to provide every part of a support system for your work and yourself, and inevitably there will be moments when you need funds above an beyond your basic monthly budget. How will you finance that large series of paintings, travel to your first international show, let alone pay for the really expensive milestones in life like buying a home, having children, or retiring? Saving even small amounts now means you get to decide what you want to embark on later.
For years, my method of financial planning was to keep a mental tally of expected checks and compare it to my long list of monthly bills -- inevitably funneling money towards the noisiest expenses without any thoughts of the future. But the dangers of this common scenario are threefold:
- 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 haven't moved your savings out of reach, it's too easy to let your expenses expand to include all the money you have on hand.
- You're not creating good saving habits. I spent years putting off saving, using all the cliché excuses: I don't have enough income; I'm investing in my personal growth instead; I don't know what to do with it anyway -- so what's the point? But all this did was delay creating and honing good money habits.
- You are not giving yourself access to the most powerful, free asset-building tool in the universe: Time. Time can help make up a lot of ground for a person of modest means who can only save small amounts. If you're routing those extra pennies into an account where they are exposed to compounding growth, then a long-term time frame offers the possibility of exponentially greater results. The key is -- you have to start! Time can't work through the magic of compounding if your savings is non-existent.
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. This deceptively simple problem quickly leads down the path to an overall insecure financial life, and has played a role in so many of us abandoning our art careers. If a big enough financial curveball sets you back, it doesn't take long to start looking outside your art practice to make ends meet.
Here are three practical moves you can make to get back on stable ground:
- Pay yourself a salary. Instead of letting your spending expand when the checks are flowing in -- only to feel the pinch during the lean times -- keep your spending in range with a necessary and reasonable cost of living. Stick to a set amount, even if your coffers are full. Just because you made $20,000 last month doesn't mean that you should spend $20,000 this month. It's better to keep your monthly spending as regular as possible, so you have enough left over if times get lean.
- Make saving your first expense. Financial gurus are constantly touting the benefit of paying yourself first, by putting away a portion 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 fluctuating income, however, this is a big leap of faith, and it's a practice that is all too easy to skip. But you've figure out how to pay your rent, and your phone bill every month, now all you need to do is add a 'savings' bill to the pile, and you'll quickly get used to paying it.
- Build a robust cash reserve. A cash reserve of three to six months of living expenses is an essential tool for smoothing-out the stomach-churning volatility of a fluctuating income. With a chunk of cash earmarked only for emergencies, you'll have an important asset that can save you from tapping high-interest credit when your bills exceed your income, or worse, you're struck with an unplanned catastrophe. If you defend and replenish it like your (financial) life depends on it -- then your cash reserve will always insulate you and your art practice from life's inevitable surprises. I call it 'The Bank of Me', and it allows me take 0 percent interest loans anytime I need to -- but only if pay it back.
If you can successfully make these three moves, you'll set yourself up to for a much easier financial life, with an art practice that can thrive under your hard-won, self-made, financial security.
Christina Empedocles is an artist, illustrator, designer and a certified financial education instructor. You can read more of what she has to say about money at her blog, Smartly, Art + Personal Finance. Join her in saving $1,378 this year with the Smartly 52-Week Money Challenge.