Creative People and Money
on December 13th, 2009“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?
If Albert (not real name) could claim it was business related and deductible, he’d buy it. He had every gadget known to mankind. He subscribed to expensive industry magazines, bought collectibles that piled up in his garage, and took trips across the country to carry on conversations that could easily have been conducted over the phone.
But that was OK! It’s all deductible!
He could justify having bought the stuff because it “saved him money on his taxes”, but what kind of money are you really saving when you are paying interest on debt to own the stuff? Do the math! $3,000 credit card bill, 18% interest (national average), minimum payment per month, and it will take you 33 years to pay it off and you will have paid $6,500 for it. Yowsa. In the years I’d known Albert, I never knew him NOT to be carrying consumer debt. The average American pays over $1,000 per year in interest payments and fees. Albert was not the average American, so you can vastly increase that amount for Albert.
Albert’s not special. I know dozens of motivated self-publishers who drop big bucks on attending conventions with no hope of getting a positive financial return. “It’s all investment! It’s deductible!”
Year after year those deductible convention expenses don’t bring in any positive cash flow. If they paid for their table, they had a great show! And yet, there never seems to be any long-term consideration to what dropping that wad of dough into creative investments which bring in a negative return is going to do to them when they are 50. Much less what it’s going to do to them next year.
Creators behave this way – not because they are flaky artists and writers – but because a LOT of people behave this way. Artists are self employed and therefore responsible for all the disciplines of running a business. Most businesses fail.
So do most artists, and often for the same reasons.
Being a professional creator means exercising a lot of self discipline. There’s no accounting department managing your IRA. There’s no one handling your KEOGH plan, or running a group health insurance scheme. There is no disability plan, or unemployment insurance. You are on your own. And the responsibility for prioritizing your expenditures rests entirely on your own shoulders. You cannot count on anyone to do any of it for you.
When I was first starting out, I made some of the same mistakes as Albert, but my consumerism ended in my self publishing days and learned what money management really meant. Never have the words “operating capital” made so much sense.
The only money you should be spending on your business is money that enhances your ability to run your business. That’s why you get tax deductions for it: to encourage you to reinvest so as to enhance your business.
More importantly, learning about money, learning how money works, learning about running a business is essential to your art.
No, really.
Without money, you have no resources to make more art. You have to go out and get a day job, and then you can enjoy working at Walmart instead of drawing your comics, or writing that book, or painting that painting.
Many creators are embarrassed to discuss money, or to even learn how to use it.
Some claim that the time they spend learning about running a business takes time away from making art.
But we all have time to do other things: watch TV, go to a concert, spend time with friends. Sometimes we even frame these things as important imput for our creative work: entertaining ourselves or taking a break from the studio helps to fuel our creative engines.
Reframe learning about business and money as an essential investment in your creative future. The time you spend learning to understand that contract, run your business, or about good investment practices can buy you years of creative life. The better you are at maximizing the value of the money you earn on your creative work, the more time that creative work will buy you to create more work.
If you take care of your work, your work will take care of you. Show your work the same business level respect you demand from other clients.
You are your primary client. Treat yourself that way.
Hear! Hear!
Seriously, paying attention to the business aspect of purchases can be very important.
When I decided to buckle down and start treating my ambitions as serious business, I also started going to a tax preparer (she’s a friend I know from church, but it is *her* business). The first year, she walked me through the things I could deduct. Since I have another friend who is an IRS auditor, I tend to be cautious about what I declare as business expense. I’m afraid I’m incurablely honest and so only declare HALF my comic purchases, HALF my cable bill (since I also work in film/television), HALF my internet expenses as business — because the other have really is my own entertainment. But even so, the deductions help the bottom line.
When it comes to equipment purchases, I’m careful to make sure that if I’m going to deduct the purchase as a business expence, I can also prove that I use it for business. I had to replace my digital camera this year (I stupidly dented the lense cover on my older one, so it wouldn’t open any more — the repair would cost almost as much as a replacement camera) – but I do use the camera for business: I take pictures of professional activities, and I frequently post them on my website or blogs — which are maintained to develop audience and brand recognition. And I made some equipment purchases when I could afford them, even though I knew it might be a while before they really started being used regularly for business. I’m glad I did: I have them *now* when I’m ready to really use them a lot, but I certainly could not afford to buy them now. It’s all in the planning — looking ahead to where I want to be, what I want to be doing, and laying the groundwork for getting there.
I think the planning ahead as a business is something creative people don’t always do. I see it a lot in Hollywood, in writers mostly. Producers and directors much more often have a vision of where they want to be professionally, and they lay their plans for it. Writers mostly just want to write and get their story in front of an audience. In Hollywood, they don’t think of building an audience of their own that will follow them — probably because The Industry “tells” them they are the “unimportant” element in the process. So, writers in Hollywood frequently live from sale to sale, job to job. And it leads to people who know how to make business deductions, but are less adept at planning the course of their “business”. (Which is pretty much what you’ve been saying, Colleen.)
My praise also goes to the spouses of the creative times — the ones who understand that the partner they married has a compulsion to do this creative work, it’s who they are. And that they are willing to work too, in order to allow that creative partner at least some sense of relief that they (the artist) is not the only bread-winner. I can’t imagine anything more deadly to creativity than a partner who says either by actual word or by attitude, “Why don’t you give up this hobby, and go out and get a *real* job? I’ve indulged you long enough in this fantasy, it’s time for you to step up to the plate.” Which is pretty much why I’m still single.
Okay… I can see this can go off in wild tangents. What it boils down to is that artists/writers do need to pull their heads out of the clouds of creativity once in a while and pay attention to laying the pavement for the road of their progress (business-wise).
Not wild tangents at all. Very interesting.
I’m buried, but I wanted to pop in with this: I’m certainly guilty of spending my business money on things without thinking ahead, and here’s an example of that:
I guess it was about eight or nine years ago: I had an unusually good year and decided to invest in some serious art supplies: oil paints, my Genesis Oils, some brushes, and an airbrush set up.
The cost of all of that had to be at least $1500. Probably $2000.
I’ve barely touched the airbrush, and have only done a few assignments with the oil paints since then. Probably about $1500 worth. I have one oil commission right now worth about $2500.
Since everything is going digital, I’d have been better off investing that money into computer equipment and training. I had so many excuses for not upgrading my equipment, and was stupid enough to rely on a local guy for scanning and whatnot who turned out to be a complete disaster.
Had I been thinking ahead, I could have invested $2000 into computer equipment and training nine years ago and would be far better equipped to deal with the market now. As it is, I am playing catch up every day.
I was thinking short term, and that cost me.
Now that I have all the right equipment and can do a lot of my own painting now, I have actually made MORE with my limited digital skills in the last two years with my digital art than I made in the last ten years trying with my oils.
I have very little time to devote to my oil painting skills, but I have no choice to learn the digital skills. And already I am a better digital painter than I ever was an oil painter.
So, I’ve got about $2000 worth of paints I barely use. And I would have been better off investing that money into a computer 9 years back.
Well, I have a serious weakness for art supply stores. I try to avoid them except when I need to make a very specific purchase. Because if I have money burning a hole in my pocket, I’ll walk along and go “Oooo, I like the size of that canvas! And that painting I’ve been vaguely thinking of doing would look great that size!” “Ooooo, what an interesting modeling substance! I could make decorative wall placks with that!” “Ooooo, what an interesting acrylic color! I need a glittering/irridescent paint like that!” (I haven’t worked with my acrylic paints in several years, mind you — but I *want* to!)
My latest adventure was to purchase non-drying modeling clay, so I can make forms for decorative paper-mache masks. To sell. Haven’t started those yet — I have to clear away stuff around the work space. But *that* really is a definite plan, not a maybe. Right after I get the rest of my Christmas cards out.
OMG. GUILTY! GUILTY AS CHARGED!
That sculpey in the drawer is as old as the pyramids now.
I am happy to say that this is a habit I have broken. My only purchases for some time have been pens, pencils, erasers and paper.
That said, I have bought a couple of completely useless computer programs.
BTW, over the years several senior creators have passed on or shut down their studios making me the recipient of the remainders of the careers. I am drowning in supplies no one uses anymore. Some of them have never been opened. Others are nearly a century old.
I do not have any idea how to use some of these tools.
Well, Colleen, if you can bear to part with the tools, you could put them up on eBay. There may be some artist out there who does still use them. Just a thought.
There is very little market for them. The prices being paid are in the toilet, even for beautiful, solid brass tools. No one knows what to do with them and no one uses them anymore. The exception is one very handsome tool which is used for sea navigation, as well as art.
I am going to have them framed in a shadowbox.
Some of the other supplies, like about 2 dozen HUGE bottles of glitter, wen straight to the church. I am sure they will end up on bake sale posters for years to come.
Well, I have a serious weakness for art supply stores.
My name is Bill Myers, and I am an art-store-aholic.
True story: a well-off benefactor and I were strolling along the shopping district of a big city, and behold, I spotted an art supply store.
I trembled.
Especially when the benefactor said to me, “Go in an buy whatever you want. My treat.”
I have never exercised such self control in my entire life.
I think the benefactor was actually disappointed when I bought nothing but pens, pencils, and some erasers. Chump change stuff, but all I needed.
I appreciated the offer, but I could have gone through his bank account. Seriously.
OK, I went wild and bought several different erasers to try out.
I have switched over to the Design 2000 plastic eraser. Really gets the pencil lines up, and leaves those ink lines clean!
I felt positively extravagant buying erasers just to test them.
Hi Bill!
My name is Arlene, and I should not be allowed within a 100 yard radius of a Michael’s or an Aaron Bros. Seriously.
Moving to the country has saved my wallet. I have to drive three hours to get to a decent art supply store.
That said, I go into spasms when I can’t get my Mars Drafting Dots.
I agree with Scribblerworks on consulting professionals in the field and want to emphasize that point. The professionals have a vested interest in keeping up with the changes in their field.
Even though I have a MBA, when I ran my own business, I consulted with my brother who is a CPA for tax advice and on structuring the business as an LLC.
And of course all business documents were either reviewed by or prepared by my lawyer.
And recently, I signed on with a financial planner, even though I also have my cousin and a fellow art collector who work in the field and have been giving me free advice.
Colleen, if I’d been given an offer like that, I’m not sure how much restraint I could manage. I mean, I would try not to be greedy, but…. “Oooo, this would be a great container for the modeling clay when I’m not using it!” “Ooooo, I could definitely use a new large portfolio!” “Ooooo, I’ve always wanted to try this stuff here!” Aside to benefactor: “Did that include shipping the stuff home?”
Heh.
See, I don’t think that non-artists realize the dangers of putting artists near supplies. They don’t understand that we don’t see a place that supplies what we NEED — we see a place chock full of NEW POSSIBILITIES. Where our imaginations run wild with the prospects of what a new (to us) medium could mean for our art.
*sigh* I’m so happy I’m not alone in “suffering” this affliction.
I finally had to make a budget line for art supplies.
I go through oil paint, canvas, and walnut alkyd medium the way some people go through milk. I’ve been laboriously learning traditional portraiture, which is frustrating and has taken years, but is finally paying off. The down side is that I use a stupid amount of paint, and good paint isn’t cheap. My best day at Comic-Con this year was when the president of Holbein paint came by; he not only talked with me, but he gave me free samples of paint!
It’s funny how, when it’s someone else’s money, it’s easier to be restrained!
That said, I do need a good, large, solid H-frame easel. My deltoids are massive from holding my canvas with my off-hand to steady it, lest I knock the current dinky-ass easel over.
But as far as money goes… I try really hard to manage it well. My dyscalculia makes that… a challenge. I end up calling the IRS for help and throwing myself on their mercy at tax time. For example, last year, I thought I owed them $5147. So I called. They very patiently helped me out, and told me that I owed them $1574. That’s only one from a lifetime of math SNAFUs. though it worked out in the end, it’s definitely embarrassing to not be able to catch those kinds of mistakes.
Don’t feel bad. My spelling errors are legend and I used to win spelling B’s.
You can’t proof your own work.
Art supplies are crack. Living out in the country has been good for detox.
I also used to buy too many cosmetics and lotions and crap. I hardly ever used the damned things, and six years into my rural exodus, pretty much stopped wearing it since I traipse around amid cow shit all day.