Budgeting Tips for Freelancers, Actors and Small Biz Owners

Posted on Facebook November 6, 2011

Yesterday I hosted the first ever Money Mondays Boot-Neck Bootleg Boot Camp for Artists, Actors and Creative Peeps.  It was a one-day workshop held at my cozy apartment where we covered budgeting, credit cards, debt and credit; discussed the economy, the financial markets, investing and taxes; and tackled the tough topic of saving for retirement.  It was a long day but full of great conversations about the issues that many actors and freelancers face when managing their money.

All the women who attended yesterday’s workshop were actors, artists or musicians, and almost all of them also had a part- or full-time job not related to the arts.  A few had even started their own businesses.  As questions popped up, it was interesting to see how the attendees had similar concerns, since most everyone was pursuing a career in the arts but also toiling away at day jobs to pay their bills.

Because of the nature of freelance, part-time and seasonal work, as well as the risk of starting your own business, financial planning can be especially challenging.  It’s tough to create a budget when your income is sporadic.  It’s also hard to manage debt when, during some difficult moths, you have to decide whether to pay your rent or pay your credit card bills.  This financial instability can seem overwhelming and futile, and it’s easy to feel helpless and just ignore your bills for a while.

But it doesn’t have to be that way.  Here are some tips on money management for freelancer, artists and small-business owners:

1. Establish a budget.  Because of the fluctuations in monthly income it may be difficult to establish a budget–but it’s very important that you do so.  Use an excel spreadsheet, Mint.com or another budgeting system to track expenses, capture monthly income  and pay down debt.

2. Be especially aware of your fixed vs. variable expenses.  Include in your fixed expenses mortgage/rent payment, utilities, phone, food and all the basics of living.

3. Insure your health and your assets. Don’t forget to include a column for renter’s/homeowner’s/health insurance.  If you don’t have either of these types of insurance, budget for it.  Renter’s insurance is a cost-effective way to insure your home and belongings in the event of fire or damage to your home.  You can check with Allstate, State Farm and others.  For health insurance, check with your employer (even some temporary agencies offer health insurance), actor’s unions or freelancers.org.

4. Make your minimum payments. As part of your fixed expenses, add up all the minimum payments for your credit cards and other revolving debt.  Include the minimum payments as a “fixed” expense and if you can, try to pay more than the minimum on your credit cards every month.

5. Average your  monthly income. Because income on a month-to-month basis may vary, my rule of thumb is to average out your income from the past 6-8 months.  From that average, you can allocate your money to cover your fixed expenses.  During the months that you bring in more income than the average, make sure to save some money to cover bills during the slower months.

6. Take charge of variable expenses.  As for variable expenses–well, we all know what those are.  Extra taxi rides, dinners out, bottle service at the club, mani-pedis….the list goes on.  I’m not saying don’t indulge once in a while, but be thoughtful about it.  If you know you’re planning a girl’s night out on Friday, maybe pack lunch a few times or give yourself an at-home manicure.  It may seem like a small saving, but it can go a long way.  Most important, you are in charge of your finances and not the other way around.

7. It’s Ok to say no!  Many freelancers and artists are asked to do work for free; it’s just the nature of the business.  Sometimes that free work gives you an edge, bulks up your resume or brings you closer to a paying opportunity.   But constantly saying “yes” to readings, quick freelance gigs and other pro bono work can make you feel like you’re spinning your wheels and getting nowhere.  You are not a gerbil so it’s time to get off that wheel.  Start saying no to gigs that may not add new value to your resume.

8. Give yourself an hourly rate.  Along with your years of experience and quality of work, add up the hours per day or week that you do this type of work and quantify it.  What is the going rate for someone of your experience and keep that number in mind the next time someone asks you to do something for free.  I’m not saying turn it down, I’m just encouraging your to give thoughtful consideration to the time and energy commitment you will be expending, as well as the lost opportunity for working or looking for paying jobs.

9. Set up an F-U Fund.  Once you have established a budget, are tracking your expenses and paying down debt, start saving for an emergency fund, or “F-U fund.”  Especially in these tough economic times, it’s really important to have enough money saved to cover your bills, rent and fixed expenses for 6-8 months.  If you’ve paid down your debt and have extra money to save, that’s where your money should go.

10. Set investment goals. Once you have your emergency cushion, it’s time to start thinking about your investing and retirement goals.   Keep in mind that it’s especially important for women–who generally live longer than men and statistically spend less time in the job market and more time than men caring for kids and older parents–to start saving for retirement ASAP. Even $50 a month into a retirement account can make a big difference down the road.

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