Artists are often the first admit they are terrible with money. They talk about spending it as soon as it comes in, and scrimping at the end of the month for enough to pay their rent. “I’m hopeless with this money thing,” they say, laughing off their financial hopelessness as they cram another handful of fast-food tomato sauce packets into their backpack.
The truth is, when it comes to running an art business we all need to get serious about finances. Even artists have to pay taxes and ensure we’re meeting the legal requirements. This two-part series looks at some of the issues and struggles of dealing with the finances of an artistic business.
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Financial planning for artists
The term “Financial Planning” makes me want to roll my eyes back into my head and die of boredom, but it’s actually a vital skill all artists need to learn.
Financial planning simply means understanding what money is coming in and where it’s going. The more you understand about your finances and keep them under control, the less likely you are to suffer major financial setbacks.
Here are three ways to do that:
1. Keep accurate records
The first thing you need to do is keep some kind of record system. You might like to purchase an accounting system like Quickbooks or Xero, or you could use a spreadsheet or ledger book, but you definitely need a system to track your earnings and expenses.
You need to have a dedicated business account and, probably (as I’ve discovered) a credit card. You’ll also need to ensure you’re setting aside money for taxes. I set aside 1/3 of everything I make—any surplus money at the end of each tax quarter is re-invested in my business.
Once you’ve got a system in place, be diligent about keeping up with it. Set aside time every week to enter receipts and balance your books. Every quarter, add up how much you’ve earned and file your taxes on time. With a little research, you should be able to find a good online tax calculator that can simplify the process for you.
Beyond just keeping track of month-to-month expenses, these records will help you look back and see how you’re doing over the years.
2. Price your work correctly
One of the biggest problems artists face is pricing their work correctly. Many of us will simply stand back from a finished piece and decide on a price based on what we think someone would pay for it.
Unfortunately we’re not the best judges of value, largely because we think “I can do that myself” whenever we see something artistic. As a result, we’re much less willing to part with our money then, say, a lawyer with no artistic inclinations.
When pricing your artwork, take account of the cost of the materials you’ve used. Then, add your time—at a reasonable hourly rate—and a profit margin as well. Gallery or agent commissions may raise prices even further.
Of course, if you’re producing prints of your work, this can make prices more difficult to figure out. Look at other artists in your area who are similar, and try to match the prices they put on their work.
Whatever you do, ensure the price your asking for your art covers your expenses and gives you a profit at the end of the day.
3. Embrace frugality
As an artist, you will probably see many months with no money coming in at all, followed by other months where you’re totally flush. To be truly successful in such a volatile career, it’s important to be as frugal as possible with the money you DO have, and put aside as much as possible into a savings account for the future.
For ideas on frugal habits and lifestyles, check out blogs like Get Rich Slowly and Mr. Money Mustache, and don’t forget to join us next time for part 2—where we’ll discuss planning for the future!