The first thing any creative person needs to know about managing finances, whether you’re an artist, a writer, a musician, a film maker, or anything else: Good financial management is a skill. It can be learned by anyone no matter how good or bad they are with numbers. Granted, if numbers are not your friends, there may be struggling and swearing involved, but learning and practice will gain you the skills you need. You will get things wrong, sort them out, and then get them right. More than once. The key is to not give up, because if you are a creative person who wants to make a living doing creative things, you’re going to need to manage your finances effectively. Even if you don’t want to make a creative living, you can still make your finances more organized and less stressful. I graduated with a major in Humanities. I picked that major in part because it did not require me to do any math. Numbers were not my friends, and yet I learned this. You can too. Here are some places to start:
1. Create physical space for financial things. This can be anything from a basket to an uber-organized filing cabinet. The key is to have a place to drop all those bills and receipts before they have a chance to get lost. I have a file basket on the end of my kitchen counter. It contains file for the school papers of each kid, and a file for bills and other To Do papers. When mail arrives, I throw away the junk and drop the bills, checks, and other business papers into my accounting folder. Howard empties his wallet and dumps receipts into the folder as well. Then I ignore them until it is time to go through the folder.
2. Pick a method for tracking your money. I use Quicken for family finances and Quickbooks for the business accounting. Both of these are solid programs which will require a learning curve, but I’ve found them invaluable. I know people who use spread sheets or even hand-written ledgers. Pick something that feels most comfortable for you. The key is to start keeping track of where your money comes from and where it goes. If you’ve never done it before, this process can be very instructive about your spending habits. It is vital information which you can use to make your life better.
3. Make an appointment to do your accounting. Put that appointment on your calendar and keep it. I do this weekly. Every Monday I grab that accounting folder and go through everything in it. I pay the bills, enter the receipts, cash the checks, and file important papers. Once per week gets me the good news quickly and prevents the bad news from getting out of control before I handle it. When I’m pretty sure the accounting holds bad news, I do it anyway. The bad news I imagine is always worse than the bad news in the papers. I know people who do their accounting every other week or once per month. I found that it was easier to procrastinate on the longer schedule, so now I account every Monday morning.
4. Outline clear responsibilities for all people associated with the accounts/bills. If you’re a single person who manages your own money, this is not yet relevant to you. If you share your bills or finances with any other person, it is important to know who is responsible for the accounting and bill paying. Early in our marriage, Howard and I split the accounting. These days I do it all and just give him financial reports. How exactly you do it doesn’t matter as much as the fact that everyone involved knows their responsibilities.
5. Create a budget. A budget is a plan for how much money you will spend on the various expenses in your life. This topic is big enough for it’s own blog. I wrote up some basic budgeting in my post budgeting 101. For now, let this suffice. If you have never budgeted or planned your spending, start by keeping track of what you earn and what you spend. When you have several months of information you are ready to make a budget. The power of a budget is that it lets you see when you should not buy that shiny toy even if you still have money in your checking account because that money will be needed next month for car insurance. A budget helps remove the surprise from your bills and can lower your levels of stress.
6. Save save save. If you get extra money, squirrel it away into a savings account. This money is what helps you reach your dreams. The only reason Howard was able to become a full time cartoonist was because we spent the prior decade of salaried employment saving up money and paying down bills. A solid savings account is also your shield against disaster. Everyone ends up with unexpected bills. These are easier to handle if you have money in your hands instead of lots of take out pizza. It is easier to save money if you know what you are saving it for, so keep your dream in view and save for that. This year I’m saving money because there is a trip I want to take next summer.
That’s enough to get started. Changes and learning are easier to incorporate in your life if you don’t try to change too much at once. Other financial posts which may interest you:
Financial Management for Creative People 102: Structuring your finances to support a creative business. (Forthcoming)
Financial Management for Creative people 201: Taxes, incorporation, and business plans, Oh My! (Forthcoming)
You can learn this. Good luck!