Managing Finances as an Artist and Doing Away with The Starving Artist Complex
As an artist or entrepreneur, there’s this notion that you have to live hand to mouth or on your friends couch in order to pursue your dreams. While that may have been common in the past, romanticizing struggle is a notion that we need to do away with. It’s okay to plan your exit and map out how you will be successful. You are not required to jump out of the plane with no parachute and be forced to find your way safely to the ground.
"A starving artist is an artist who sacrifices material well being in order to focus on their artwork. They typically live on minimum expenses, either for a lack of business or because all of their disposable income goes toward art projects."
For some, the harder the struggle the more they feel that they will be successful. The harder the struggle, the greater the story to tell but why put yourself through that ifit’s not necessary. Want to put some controls in place? Here are a few to get started.
Create a Budget For Yourself and Your Business
Budgeting is not just for your personal finances but your business as well. Your numbers should never be a guessing game. Knowing how much you have coming in and out is crucial. Creating a plan for that money is even more critical. If you’re like most entrepreneurs, you may be funding your business yourself. Even more, you may be your business’ only investor. In that case, you have to pay close attention to your finances. When creating your budget it’s important to understand the assumptions behind the numbers and what drives those numbers. For example, how will you project next month’s sales? You can look at the previous month as a starting point and factor in real growth. At the end of the month, you review your numbers and compare the budget to actual numbers to see how close or far off you are so you can better plan for the next month.
Separate Your Finances
So you have a business but do you treat it as such? The difference between a hobby and a business is whether you intend to make a profit or if you depend on income from the activity. If you’re generating income and or paying expenses, you need to be able to account for that. The best way to do so is to have a separate business bank account. This is also important in the event the IRS ever audits you. You want to be able to show a clear distinction between you and your business. Keeping accurate and up to date records removes confusion and the numbers guessing game.
Track Your Cash Flow
How many times have you heard this? Tracking your cash flow is key to
understanding where your money is going. You can also assess whether you’re overspending, need to cut costs, or whether you are bleeding your pockets dry. Being aware of how cash is moving is a critical internal control that EVERY business should have in place. A great way to track cash flow is to use a technical system.
Some options include Quickbooks, Wave Accounting, and Freshbooks. Depending on the size and volume of your business will determine how robust of a system you need. On a monthly basis, you or your accountant/bookkeeper should be reconciling your accounts to ensure that income and expenses are accounted for and are categorized correctly. This also makes for a seamless tax preparation process.
Monitor Your Use of Debt
If cash flow is low you may be using credit to fund your business. While that may be okay in certain instances you want to be careful not to rack up debt that you are unable to pay off. A good rule of thumb would be to budget a certain amount of your credit limit to your business and cut yourself off once its reached. Linking your credit account to your accounting software can help you track use of your card and help hold you accountable. It can become very easy to rely on credit, which can have an adverse affect on your business. Ensure that you are completing regular money check-ins and monitoring your use of debt. If you find that you’re using your credit too often it may be time to reevaluate your business model and whether or not it’s sustainable.
Create a Healthy Mindset Regarding Money
Your relationship with money is normally based off of your upbringing and how you were raised to treat money. Depending on how you saw others treat money has an impact on how you treat it. If your mindset is poisoned, you have to reshape your thoughts and create a healthy mindset moving forward. All of the money in the world won’t make you feel secure if you’re harboring negative feelings and thoughts about how to handle money.
How do you create a healthy mindset?
- Acknowledge the money habits and mindset you were raised with
- Challenge those habits and understand why they aren’t fact
- Determine how you would like to view money and what about it is important to you
- Create new money mantras and practice consistently affirming yourself
- Never forget your why
Bonus Tip: It’s perfectly okay if you decide to keep your day job until you have comfortably built a cushion that will give you room to be creative full time. You getno brownie points for voluntarily struggling. Your success will still be as valid as the next person while also being financially responsible.
Bio: Germeen is a business professional with over 7 years of experience in the Accounting field. She is also the founder of Your Life and Finance which is a personal finance platform that educates millennial women on how to manage their money and become financially responsible.
You can learn more about Germeen and her services at: http://yourlifeandfinance.com/