5 Simple Money Rules

The idea of tackling their financial situation often intimidates people. They feel as if the situation is too large, too overwhelming, to be tackled, and so they adopt the Ostrich mentality (ie sticking their head in the ground) and say things like "I will sort out my finances when I get my "big break"... at least, I know I did!
But the reality is that there are several small, simple things that anyone can do to improve their financial situation right away, things that will lay great ground work to build on over the course of people's creative careers.

Pay Yourself First

This really is the corner stone of any long term financial stability, let alone wealth. What this actually means is simply that, every month, you are putting a set percentage of your income into a high interest savings account, and not touching it until you are ready to invest with that money. And that is the key. This is not the "rainy day" account that you dip into when things get hard, nor is this the "splurge" account to get something special for yourself as a celebration. Money is only withdrawn from this account to buy assets with - an asset being defined in this case as something that either makes you money, or appreciates (increases) in value (so a new car would not be an asset under this definition!). Do this consistently and, over time, you will build up a very nice amount of cash to be investing with.

Regular Money Days - records & Organization

A "Money Day" is simply a day that you set aside to work on your finances. Now, it does not have to be a whole day, of course - unless your situation merits it... usually because you haven't done one for a long time! Personally, I set aside a couple of hours every other week, and then a meeting with my accountant over the phone every couple of months. Doing this accomplishes two things: it keeps your accounts in impeccable order, and it allows you not to think about your finances between times, freeing you up to think about and do other things... like your art

Fore-cast your spending

Forecasting is the process of allocating where your money will be spent. You start by going through your Chart of Expenses (email us at mailto:info@abundancebound.com if you need one of these), and finding out where and how you currently spend your money. You then go through that list, and determine which categories cannot change (rent, for example) and which ones can (groceries, entertainment etc). Having got that list, you can then make strong, educated decisions about where you choose to spend your money... as opposed to just blindly trying to cut out Starbucks or eating out. And that is the big difference between this process and traditional budgeting. We never suggest eliminating a category, as we have all heard "absence makes the heart grow fonder". But as opposed to going to Starbucks every day, can you go every other day? Or order a Tall instead of a Venti? Doing this in several areas can make a huge difference to your overall spending.

Keep business separate from personal

Many of us do something called "co-mingling": we operate our entire lives out of a personal checking account. The problem with this is that no "real" business does this - you would never see the CEO of Kinkos write a check for the company out of his personal account. What we need to do, at the very least, is set up a DBA (Doing Business As) account (www.legalzoom.com can help with this) for our artistic career, and get a business bank account associated with that DBA. Not only does this then allow us to clearly see what we are spending and earning through our acting career or art sales, but it also legitimizes the tax deductions we take due to our art - the IRS can clearly see that we are running our career as a business, not as a hobby. The reason this is important? Business expenses are deductible, hobby expenses are not (this distinction can hurt, to the tune of thousands of dollars of back taxes: one of our students got nailed this way)

Regular financial education

Keep doing what you are doing right now! We take time to go to art school, acting classes, workshops... but we expect our finances - something most of us have never worked on (a fundamental problem with our education system, and something we will address in a separate article) - to somehow take care of themselves. Not only is this not realistic, it is dangerous, as we can make numerous serious mistakes blundering around while we try and find our financial way. The biggest reason people stop pursuing their artistic careers is lack of money. Knowing this, doesn't it make sense to put some time into financial education now, so that you are around for the long term? We read all the time about people only breaking out in their forties: wouldn't it have been sad if they had had to leave the arts before then because they had to make money? And wouldn't it be sad if that was going to happen to you... and you had to quit for the same reason? So carve out some time now to learn about money - it will be well worth it in the long run.

So there you have it - five simple things you can implement right now that will significantly improve your financial picture over the coming months and years. Incorporating all of these things into you daily and weekly lives is only a tiny time commitment of time, but the dividends from doing so can last a lifetime.