“When rich people get together, they talk about art. When artists get together, they talk about money.”

Oscar Wilde

Creative people are notoriously bad money managers. Notorious, because we always hear about the author with the million dollar selling book who ends up broke a few years down the line. People who win the million dollar lottery usually go through the whole wad within 3-5 years, too. Are artists really any worse at managing money than anyone else?

I don’t think so.

Money management is a set of skills, and contract negotiation is another set of skills. Being an artist or writer means spending years developing the craft that gets you the sales that make you the money. You probably didn’t get 5 years of schooling in economics, or 6 years of graduate law school to go along with your painting classes.

And few commercial artists ever get a big break. The last time I looked, the average freelance commercial artist (according to the Graphic Artist’s Guild) made less than $15,000 per annum. And that’s with no benefits. So, out of your $15,000 per year, you have to pay for your business expenses, as well as your health insurance, your legal fees, and your disability insurance, leaving you with just a few thousand bucks annually to live on.

I haven’t seen a year with income that low in quite some time, but even when a mainstream cartoonist makes $50,000 per year or more, he still has to pay all of his own expenses, as well as finance his own retirement plan. So, on $50,000 per year (which seems like good income) a cartoonist can expect to have about $25,000 per year left over to live on, before taxes. This is not exactly high on the hog.

Here’s a common example of how creative people can be wrong-headed about money management:

The cool part of being a creator is you get to deduct comic books and art supplies as business expenses. That sounds great, doesn’t it?

The uncool part is that if you go overboard spending on all the neat things you get to buy and deduct from your taxes, you may not have enough money left over to pay everything you really ought to be paying.

I’ve had several acquaintances who made this mistake year after year and wondered why they were always broke.

As professional artists and writers, they loved the fact that the stuff they loved to buy was also tax deductible: computer gadgets, magazines, cool movies. What a break! They could easily blow $1,000 a month or more buying stuff. And it was OK to buy the stuff because it was business related and therefore, deductible.

If I spend $1,000 on computer equipment, I am going to save roughly $300 in taxes on the equipment. Wow! What a deal!

But the fact is, I still spent $700 on stuff. Is that $700 really going to enhance my ability to work? Increase my ability to make more income? Make my life better in any meaningful way?

(more…)