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Community Directory - Articles |
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| Financial plan for the Artist |
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If
you are
in the
arts, a
steady
paycheck
does not
exist.
Money is
like an
emotional
roller
coaster,
one day
you have
it, the
next day
you do
not and
you are
scrambling
to pay
your
bills.
You
never
know
when
your
next pay
check is
coming.
In order
to
survive
in the
arts
business,
you need
a
financial
savings
plan.
Often
artists
make the
mistake
of
thinking
that
income
will
happen
on a
regular
monthly
basis.
Often
this is
not the
case. In
this
article
I will
discuss
budgeting
as it
relates
to
having a
financial
plan for
the
artist.
Create a
monthly
Budget
that
includes
saving
money. A
key
component
of
budgeting
is
financial
planning,
which is
a
dynamic
process
that
requires
regular
monitoring
and
re-evaluation
of
income
and
expenses.
In
general,
there
are five
steps to
budgeting:
Assessment: Your personal financial situation can be assessed by compiling income and expenses incurred. Gather the last two years of W2 ’s and your monthly bills.
Setting goals: Set short term and long term goals. An example of a short-term goal is “to save $100 monthly.” An example of a long-term goal is “to retire at age 65”. It is very common to have several goals, some being short-term and some being long-term. Setting financial goals helps direct financial planning. No two people are alike in regards to financial situation, which is why you need to identify your unique financial situation. Understanding both your short-term and long-term financial needs will help you choose the best approach to help you meet your goals.
Creating a plan: The financial plan details how to accomplish your goals. It could include reducing unnecessary expenses or increasing employment income or how to invest your extra money.
Execution: Execution of your personal financial plan often requires discipline and determination. The key is sticking to your budget. It is hard to save money when you have the extra cash that could be used to go shopping. It is essential to restrain from impulsive spending and to control your financial situation.
Monitoring and reassessment: As time passes, your personal financial plan must be monitored for possible adjustments or reassessments. Typical goals most adults have are paying off credit cards and or student loan debt, retirement, college costs for children, medical expenses, and estate planning.
Artists
more
then
likely
have
irregular
income.
When
budgeting
for
irregular
income,
special
precautions
need to
be taken
for
individuals
operating
on
irregular
income.
Do not
spend
more
than
your
average
income
and do
not run
out of
money.
Evidently,
you need
to
estimate
your
average
yearly
income.
Spending,
which
will be
relatively
constant,
needs to
be
maintained
below
that
amount.
When
creating
a
budget,
expenses
should
be 10%
below
the
estimated
income.
To avoid
having
cash
flow
problems,
by
running
out of
money
because
expenses
occur
before
the
money
arrives,
a safety
cushion
of
excess
cash
should
be
established.
There is
no easy
way to
develop
a safety
cushion.
You have
to spend
less
than you
earn
until
you have
accumulated
a
cushion.
This can
be a
challenging
task.
When you
get
money
for an
art
project,
you
should
put it
in an
interest
bearing
savings
account
preferable
an
internet
on-line
savings
account.
Internet
savings
account
is
typically
a high
interest
account
with no
fees and
no
service
charges.
The
reason
why the
internet
online
accounts
have
high
interest
rates
and no
fees is
because
they do
not have
the
overhead
expenses.
Many of
these
internet
accounts
have a
minimum
of $1 to
open. If
you
receive
a large
sum of
money,
put away
an
amount
that you
do not
need for
awhile
in a CD
account.
This way
your
money is
earning
interest
at a
higher
rate.
You
should
have a
savings
of six
months
worth of
income
to get
by when
you are
not
working.
Below is
a sample
budget.
Sample
Budget
|
Category |
Percentage |
Annual Amount |
Monthly Amount |
| Total Gross Income |
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| Taxes |
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| Investments (before tax) |
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| Net taxable income |
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| Percentages below are for percent of Net taxable income |
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| Housing |
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| Utilities |
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| Food |
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| Toiletries |
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| Automobile |
|
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| Insurance |
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| Debt Repayment |
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| Entertainment |
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| Clothing |
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| Savings |
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| Medical/Dental |
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| Miscellaneous |
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| Investments (after tax) |
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There is
software
for sale
that is
specifically
written
for
money
management.
Some of
the
products
are
Quicken
and
Microsoft
Money.
They are
designed
to keep
track of
individual
account
information,
such as
checking,
savings
or
money-market
accounts
and
budgeting.
These
programs
can
categorize
past
expenses
and
display
monthly
reports
that are
useful
for
budgeting
future
months.
There
are
websites
that
help
track
spending
and show
you
where to
save
money. A
few
sites
are
moneycenter.yodlee.com,
Geezeo.com,
and
Wesabe.com.
CNNmoney.com
is a
good
financial
website
to use,
especially
when
trying
to
improve
your
bottom
line. If
you have
investments
such as
IRA ’s,
401k,
and
mutual
funds
etc. the
plan
administrator
of the
investments
typically
have
tools on
their
website
to help
manage
your
investments,
savings
planning,
and
retirement
planning
etc.
To
conclude,
creating
a
financial
plan is
essential
for
strategically
meeting
your
short-term
and
long-term
financial
goals,
and it
makes
good
financial
sense.
Currently,
Stacey
L. Morin
works
for
Wilshire
Associates
Inc. in
their
Private
Equity
Division
as
Assistant
Controller
and
holds a
Masters
of
Business
Administration
in
Finance
from
California
State
University
Northridge
and
Bachelors
of
Business
Administration
in
Accounting
from
Eastern
Michigan
University.
Ms.
Morin is
a
Freelance
Business
Consultant
Writer
on the
side.
By
Stacey
L.
Morin,
MBA-Finance,
February
2008
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