Posts Tagged ‘money’

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Making a living – Making a life

Friday, May 14th, 2010

I had lunch recently with a friend of mine who is a lighting designer. He is probably one of the most talented designers I have come across, a powerful unique voice, meticulous, insightful dramaturgical understanding, and one of the nicest people you will ever meet. He is currently transitioning out of live entertainment and considering going the route of architectural lighting design, or possibly something else entirely. His reasons? In order to have enough time to enjoy his life, he can’t make a living. In order to make a living, he doesn’t have time to enjoy his life.

This can be a dilemma many people face but it is exacerbated in the fields of theater, opera, and dance. LORT, the bargaining organization for regional theaters, has the official position that they do not owe designers a living wage. The theaters, which are ostensibly in the business of making art, do not feel responsible for paying the artists they employ enough money to live reasonable lives. Leaving aside the issue that the upper management and staff of these organizations do typically make a good living wage, this idea is flawed to its very core. The artists, the people who actually make the art, are not expected to be able to live off the work. Something is wrong here.

The result of this brilliant financial strategy on the part of regional theaters is that not only will they save thousands of dollars each year (yes only thousands, and intended sarcastically) but they will drive talented people out of the industry. This friend of mine is no small potatoes. He is highly respected within the New York theater community, has won awards, gets flown around the world to light shows, and yet finds the economics so troubling that he can not both live well and do the work he loves. He is not alone.

Many people I know, some very talented designers, work in fields not of their choosing because the economics of the field they love are so terrible. The issue does not limit itself to designers. One of the best master electricians I have ever had the pleasure of working with left non-profit theater to go work in a more corporate setting because the administration would not consider giving him a raise. In most situations, a worker who delivered under budget and ahead of schedule, all while pleasing the clients he interfaced with would be rewarded. But then, he worked on the wrong side of the building. Art, it seems, is not valued by arts organizations. Yet the top paid administrators made easily five times his salary. And the theater community lost one of the best electricians I have known.

There comes a point when the question arises, is this worth it? Is it worth working 80+ hour weeks for months on end only to end up with barely enough money to cover rent and bills? There is a bit of mental psychology that must be done when working like this. There is a rule I once learned the hard way by breaking it myself. I fast realized if I wanted to keep going I could never do it again. Do not translate into an hourly wage. Typically the results, in our fee for hire work, are far below minimum wage. The show I calculated out for ended up somewhere around thirty cents an hour. And this is at a professional level.

At the Broadway level, the minimum rate for a lighting assistant comes out to just under twenty dollars per hour. Not terrible, but you are working 14 hour days for weeks at a time, so you can have no life while this is going on. At the low end of the scale people have no compunction asking someone with years of experience, an advanced degree, awards, and so on if they would give up two weeks of their life for a fee of a few hundred dollars. It doesn’t hurt to ask, but then if you accept, demands are made on your time that are beyond the pale of reason.

Making a living in the theater is possible. Making a life, not so much. The number of designers who wake up at 50 suddenly realizing they forgot to get married and have kids, or who send their kids off to college knowing less about them than about their assistants, or miss a major wedding anniversary for a technical rehearsal, is far far too much.

We are presented with a bit of a catch-22. The organizations which hire us have stated explicitly that they will not take care of us. It then becomes incumbent upon us to take care of ourselves. But if we do that, and allow ourselves to have a life, we are not working enough to support that life. Something has got to give. Too often, that means talent goes elsewhere.

Perhaps there was a time when the economics of it all were not so unfavorable. But looking around now at the state of the business it appears that the solution does not reside in the non-profit theater world.

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The Affirmative No

Monday, May 3rd, 2010

I was given two pieces of advice about how to evaluate potential projects when I was in graduate school. Both came from successful designers and with me just starting out figured I would incorporate this advice as best I could. The first piece of advice had to do with criteria for evaluating projects. There are three reasons to do a show; the art, the people, or the money. So long as any two of those three were present, the job was worth taking. The second was much more straightforward, take every job you can since you have no idea where it might lead.

Over time, the criteria I use to evaluate projects has gotten more refined, but in truth, more personal. Increasingly, I find myself drawn to projects that fully meet my creative artistic needs. If I am doing a job just for the money, the money better damn well be worth it. Otherwise the project must support my artistic needs.

In these lean economic times finding work has been much more difficult than it has in years past. As a function of this I was on the path for a while of taking a few projects for which I had no artistic connection because I felt I needed the money. The more I thought of this, the more these projects would bother me. Finally, I realized what it was.

As a freelance designer I do not have the luxury of sitting in my studio and creating wholly out my mind. I do not get to generate the project. Rather, I am asked to do a project and I can either accept it or turn it down. While I learned a lot during my years of saying “yes” to everything, I am increasingly learning the value of “No.” This is not the No of negation. Rather this No is an affirmation of the aesthetic viewpoint I want to propagate in the world.

By saying No to projects that I do not wholly believe in I am saying Yes to the projects that I truly want to work on. The more I do this the more I find it has less to do with the specific pieces themselves as it does the people involved and the final product being created. In short, I have discovered that there are only two reasons for taking a project, the People and the Art. Follow those two things and the money will take care of itself.

There are a hand full of directors who I will work with at the drop of a hat and without hesitation because I believe in the work they do. One of these, a long time friend, has a very different aesthetic than I do when it comes to lighting. The process can often be quite a struggle for me as I overcome my own ways of seeing to get behind his eyes. Nonetheless, I believe in his work and larger vision strongly enough that this has sufficient artistic merit for me to take the project.

Working for the money, all you have to fall back on when things get difficult is the thought of that paycheck. Working for the Art and for the People keeps in clear view that what you are working for is something larger than yourself. It is, in fact, bigger than everyone involved.

As Moss Hart has famously said: “I have had many successes and many failures in my life. My successes have always been for different reasons, but my failures have always been for the same reason: I said yes when I meant no.”

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Dirty Money, Starving Artists, and the need for new myths

Friday, November 6th, 2009

One of the most pervasive identity myths that haunts art worlds is that of the starving artist. There are countless examples in popular culture of this archetype including a very good opera about the subject. While the idea that a true artist suffers and through suffering art is born might have a degree of romantic mystique the truth of the matter is that all suffering creates is suffering. The archetype of the starving artist, and her condemnation of anyone who achieves any degree of success as “selling out,” does little more than provide limited solace to an otherwise unpleasant existence.

Archetypes are powerful things. Consciously or not, as beings in the world, we emulate strong and powerful archetypal roles. Not to get too Jungian but I see it as far too common to deny. Personality is performance. In the performance of personality we model our ‘character’ off of good actors (in real life or literature and pop-culture). The starving artist, through its romantic appeal, is a popularly recurring figure. Sadly this figure does more of a disservice to us in the long run, in the same way as the alcoholic writer generally creates alcoholics not writers.

The starving artist type gains value, to a greater or lesser degree, in the idea that money is somehow dirty. There is an air of superiority, by those who don the starving artist type, placed around obscurity. It is as though anyone whose work could be understood by, and thus appreciated and paid for by, more than a select inner cabal of followers is somehow flawed. Because popular/successful is read as bad, money, as a tangible proof of popularity of ones work, is also treated as bad or dirty. There is a belief that the work itself becomes sullied by making money off it.

This is as common in the performing arts as it is in any other medium. Many theater makers working on a small scale will deride the “commercialism” of Broadway plays or the work produced at regional theaters. Rather than examining the work itself the funding for the work comes under attack. Rigorous critique is replaced by a more general barrage against slick stagecraft and well rehearsed acting. Taken at their root these critiques are really about money and the relative access to, or paucity of, its presence in making the work.

While it is true that throwing money at a bad play will not make it better it does not follow from there that all plays with good funding are bad. It is true that people throw millions of dollars into producing total crap while others spend next to nothing to make a true gem. At the same time, those true gems, with a fully financed producer, would potentially become even greater while the well financed schlock would remain schlock.

The archetype of the starving artist and the myth of dirty money have created a false dichotomy between “uptown” and “downtown” theater. Between “indie” and “commercial” plays. Being poor does not inherently make one virtuous and even Jerzy Grotowski conceded that poor theater costs a lot of money. High budgets do not make one good or bad. Powerful authentic art can exist with no money or all the money in the world. But this is not the point. The focus of our critiques should center on the quality and effectiveness of the work itself rather than its funding.

So too our personal narratives would do well to be reoriented away from the damaging myth of the virtue of the starving artist and back towards the rigorous and devoted artists and craftsman. Even a cursory look at the Renaissance shows us that powerful and lasting works can be created from well funded origins. There are many people in pop-culture one might look to who are wildly successful and still maintain a high degree of artistic integrity. Danny Elfman comes readily to mind as one such example as does his regular collaborator Tim Burton. Many artists have made the transitions to the big leagues without sacrificing their artistic integrity.

Poverty is only romantic with distance. It is time to retire the Starving Artist as a myth of a bygone age. A romantic notion, well fit for literature, and hardly worth modeling one’s life after. The reality of the starving artist too easily winds up starved. We need new archetypes for a new millennium. Archetypes that empower us to live strongly and courageously as artists in our contemporary world and beyond.

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From the Archives: the art of money

Friday, September 25th, 2009

Note: This was originally posted almost two years ago in December of 2007. It is interesting to me to see how much more sophisticated my writing on finances is now than it was then.

I hope you enjoy.

The other day imomus mentioned that when money people get together they talk about art and when art people get together they talk about money. The money of art is something that can be rather difficult to talk about. I think this is a primary reason professional artists generally have agents. Leave the money dealings to someone else so the artist can focus exclusively on the art.

But the business of art is very important. After all it is with money that food and shelter are procured. In the theatre the business of the art is at the fore. Unlike disciplines like painting or sculpture that one might do in seclusion and then, once completed, present to the market, theatre is done from the beginning in collaboration and those collaborators must agree on what fees are paid, to whom and when. They must agree as to who controls the rights to what and under which circumstances.

Working in the theatre it is necessary to be at once a “money person” as well as an “art person.” But often one is a “money person” without much actual money. Or at least with an income with as much fluctuation as the stock market. Since all my work is on a contract basis and my checks(portions of the total design fee) are paid on an irregular schedule it can be very difficult to organize this financial situation.

I am a big believer in saving and investing and find the typical American’s reliance on credit cards as a “cash reserve,” or worse yet supplemental income, to be reckless at best. At the same time, due to the often inconsistent nature of my work, I have at times been forced to use this less than ideal “cash reserve.” But how does one save and invest reasonably and responsibly with such a fluctuation in income?

What I have found to be of greatest use is to treat everything I make in terms of percentages. I do have fixed expenses, things like rent and utilities, so there is a minimum I must make each month. But after that, everything can easily be scaled to the amount of money I take in. I put away a certain percentage for taxes, and another percentage for savings. Then what is left over is free for all other expenses.

By dealing with my money on a check by check basis(as opposed to yearly or even monthly), I am able to save money during the leanest times. If I try to save ten percent of my income, when a thousand dollar check comes in I can take out one hundred dollars and this is not noticeable in the regular flow of things. Certainly not when compared with attempting to gather thousands of dollars at the end of the year to put in savings.

Breaking finances down to small easily manageable increments makes the whole thing a lot easier to understand. This is why I enjoy sites like Get Rich Slowly. It takes a reasoned approach to personal finance and breaks everything down into components that are easy to manage. So much so that almost insurmountable feats like paying off credit cards is broken down into five easy steps.

The business of art need not be something to fear. With a little planning and research even the most organizationally averse can practice the art of money.

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Income Averaging for Freelancers – 7 Tips for starting out

Friday, August 14th, 2009

One of the things I discussed in my recent series on finances for freelancers is the use of averages to determine spending and salary. I thought the point could use further explanation as it is a central concept necessary to understanding the unique challenges freelancers face. While many people have irregular income, the way it manifests for freelancers can be uniquely tumultuous. Further, this is particularly tricky when just starting out.

The fee/income structure of your field will determine how useful averaging is. At the extreme are freelancers who get a single lump sum, while others will have regular payments throughout the project as various phases reach completion. I will be using my own field, theatrical lighting design, as an example throughout this discussion. Obviously your mileage may vary.

Lighting design fees are typically based around project phases and as such come in large irregular chunks. I tend to get three checks on any given project. The first check is delivered upon contract signing, the second when the lightplot is delivered to the theater, and the third at opening. Because of this structure I may, for example, sign several contracts at the beginning of the year thus leaving me with a large stockpile of cash in January. After that signing I may not have any projects completing in February, so while my income for January is quite high, my income for February is negligible to non-existent. March might be somewhere in the middle with a plot or two completing and a show opening.

As you can see, the variance month to month is quite profound. Obviously I can’t base my life and budget around the minimum I make in a month as I would then be trying to live off $500 a month and that is simply unrealistic. Trying to base my living off of the highest month would be unsustainable as it would land me in piles of debt once I hit a low period. Add to this the fact that every year has a slightly different rhythm to it, I need to find a way to look at the big picture and make my income assumptions, as well as budgeting plans based on something larger than a monthly unit of measurement.

What is critical with a system like this is taking the long view. Monthly projections will not get you very far. During boom times you will be living large or paying off debt and during bust times you will be scrambling and accumulating debt. By looking out at your income over several years and noting what a typical average month looks like, you will have enough data points at your disposal to make strong informed decisions.

Some systems suggest budgeting for your income based on the month you make the least amount of money. This might be fine if we are talking about someone whose income only fluctuates 10-20% each month. But with any profession whose income is as irregular as mine and most other freelancers I talk to, averages make far more sense. If you have any real track record for your income, at least 3-5 years, it will be a simple process to know what a typical year looks like and make your calculations from there. With a few years worth of data one can make assumptions based upon a large enough pool of information that a realistic monthly average will emerge almost naturally.

All this begs the question what to do when just starting out. How do you manage this in your first year when you have no data to fall back on? Below are a few points to consider when making the leap from employee to freelancer.

  1. Ask around
    Talking with people in your field can be a great way to get a sense of what things will look like, realistically, for those first few years. Specifically talk to those a few years ahead of you. While someone at the top of the field can be wonderful as a hero, they won’t necessarily have practical help for where you are right now. Someone two years out from you will.
  2. Build an emergency fund
    Save up at least four months of income to spread out over the year. As you adjust to the boom and bust cycles of each month this will help you get by and feel comfortable and secure.
  3. Don’t do it all at once
    In my first two years as a freelancer I worked a full time job for four months out of the year as resident lighting assistant for the San Francisco Opera. This allowed me to stockpile cash and thus ease the burden of the next eight months.
  4. Create multiple income streams
    If you are a designer, can you also assist? Do you know photography, graphic design, or some other skillset that could get you work beyond your preferred niche? Do it.
  5. Don’t specialize
    Be receptive to projects outside your ideal aesthetic range. Take them on as a challenge to discover a broader array of aesthetic viewpoints. Not only will you learn a lot, but you will have access to more work.
  6. Don’t be afraid to fail
    I made just about every mistake possible my first year freelancing. The biggest was forgetting that I was responsible for tax withholding. It took a few months of scrambling to get together the money to pay that bill. I still mess up, but I take every error as a learning experience and constantly upgrade my system.
  7. Have fun
    Too many people get so frightened over the money situation that they pass up fun and exciting projects that may not pay as well. I got into freelance design in order to have the flexibility to take projects that are artistically satisfying. If I wanted to sit at a desk and be miserable in order to make money, I would get a full time job.

Gathering as much information as possible about the business aspects of your field is as important, if not more so for a freelancer, than is having the skill set necessary to do the job. The skills will get you the work and get you hired back. The financial knowledge will keep you from going bankrupt in the process.

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Targeted Savings Accounts for Freelancers

Friday, July 31st, 2009

As Freelancers our monthly intake varies wildly month to month, so we must set up a structure that allows us to live without day to day concern for those fluctuations. In Part 1 we discussed budgeting. Part 2 dealt with salary. In Part 3 we explored emergency funds. Now we move on to targeted savings accounts. Targeted savings accounts are an important part of a solid personal finance base and critical for freelancers.

Targeted savings accounts come in two flavors. One has to do with large annual or irregular expenses, such as insurance payments, dental visits, holiday gifts, or a new computer. The other are regular expenses that fluctuate strongly and thus are difficult to budget for in the traditional sense. In all these cases the matter comes down to averaging the expenses. This is the same process we do to address salary. Since many freelancers see fluctuations by as much as several hundred percent in their incomes from month to month, the only reasonable way to approach this is with averages.

Remember, emergencies are dealt with in emergency funds as outlined last week. What we are talking about is known irregular expenses. So on to averages.

How does this averaging work? Well, let’s take our first example, the large irregular purchase. These are the ones that trip people up the most. Because they are not planned they often surprise, despite the fact that some amount of unplanned expenses happen every few months. This month it may be the car, but six months down the road it may be the computer. Then there is the one that gets everyone on April 15th, TAXES.

Let’s say you know you will need to buy a new computer in about a year. The computer that you want retails for around $2,400. Most people tend to wait until they want to buy the computer then when the time arrives they throw the whole thing on a credit card and pay it off in installments. However with this model you end up paying closer to $3,000 or more with interest. Instead what we do is set up a savings account specifically for the purchase of that new computer. Every month we put $200 into the account. At the end of a year, we have enough to buy the computer and with the interest earned cover taxes on the machine.

Simple.

There are also medium to large expenditures that occur regularly but more spaced out than, say, rent. The dentist is a perfect example of this. A regular checkup with my dentist is in the range of $120. I am supposed to go every six months. As such I have set up a savings account that I deposit $20 into every month, thus giving me the $120 when it is time to go.

These averages are included in my budget. So while I might not “spend” the money each month, it is accounted for and taken out of my salary. And my salary in turn is composed of both monthly expenses like rent and groceries but also these irregular expenses.

One of the most difficult for most people is Taxes. However, after freelancing for a few years you get a rough sense of what your real tax rate is going to be. As a lighting designer I have very high overhead. As a result my deducible expenses are correspondingly high. While I could save 40% of my income “just to be safe” I know that realistically I only pay 10% of my gross income. As such I put that much away into a targeted account just for taxes. If I have any left over it is usually not that much and I can just roll it over for the next year.

On taxes, since I have over 5 years worth of data I am basing this 10% number on my own specific situation. Yours may well be different and certainly if you have less overhead you will pay at a higher rate relative to your gross income. If you only have a year or two worth of data being overly cautious can’t hurt.

I then have a generalized savings account for regularly budgeted business expenses. While I budget for what I typically spend in a month, some months are a little more and some a little less. If I budget $15 a month for stationary but only spend $10 this month I put that extra $5 in a generalized account. That way in two months when I spend $20 I have that covered without upsetting my budget.

From reading all this you might think I have 20+ savings accounts with various banks. In fact I have two. One is my primary account from which I pay myself a monthly salary. The other is with an online bank that allows me to create as many “sub-accounts” as I want. A good, and deeply sarcastic, explanation of this sub-account system can be found here.

With a little advanced planning we freelancers can create a smooth life for ourselves despite the economic vicissitudes of our work. By implementing this system of targeted savings accounts it fast becomes possible to deal with the little bumps caused by irregular expenses that would otherwise trip us up or cause us to plunge into debt.

Please join the discussion in comments!

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Budgeting Irregular Income

Friday, July 10th, 2009

Last week I wrote about the difficulties of money management when dealing with irregular income as a freelancer. I listed five areas of focus through which we can gain a handle on our finances. Today I want to focus on the first of those five, budgeting. Getting this right is the key to the rest of the system. It is a foundational element of a healthy financial life and deserves spending a fair bit of time on.

Now before I go any further it should be noted that the following system is not for everyone. There are many variations out there that may work as well or better for you . What I will be outlining is a system that I have developed through much trial and error that works for me. Your mileage may vary. I went through at least 5 different budgeting systems before I developed this one and even now I make small tweaks along the way.

The most important aspect of working out a budget is to include EVERYTHING. This can be hard for a lot of people as one often does not want to admit to certain purchases, but if you spend $150 a month on comic books, you should include that in your budget or else there will be constant wonderment as to why you are always over budget. Find a place for everything.

Some items will be combined together, while others will be discrete categories. The key is to break down your budget categories as much as makes sense for you . Some may have a general dining out budget while others will separate that into dining-food, coffee, drinks, snacks etc. No one category structure is right or wrong, the point is to make it as accurate as possible and as reflective of your true habits as it can be. I drink a lot of coffee, so I have to include coffee as distinct from other food and dining options. This will not be the case for others.

The spreadsheet I have is broken down into four categories: Personal Expenses, Business Expenses, Savings and Income. Note that there are multiple sub-categories for each of these. This is because as a freelancer I not only have many different kinds of expenses that are treated differently with taxes, but I have different incomes as well. While it does not really matter from a tax perspective whether that $1000 came from a small design or some consulting work, it is useful for me to know where my money comes from when planning where to put my focus.

I will get to how to handle the Savings and Income later, but since we are dealing with budgeting let’s begin with expenses. Download the spreadsheet here. It is an OpenOffice Document. If your spreadsheet program does not support .ODS files, you can download OpenOffice here or use Google Docs.

As a freelancer you are bound to have some categories that overlap from personal and business. Big ones for me are rent and cell phone. I have two equally valid ways of dealing with this. One is to simply divide the number manually and enter it into two categories, one for personal and one for business. This requires a little more work with each entry but is a bit cleaner when we get to the spreadsheet. The other is to enter the total amount into the column and then have your spreadsheet run a simply calculation to divide the number between the percentage that is personal and the percentage that is for business.

Once you have determined how you want to deal with these overlaps you are ready to begin working with your spreadsheet. Some people prefer quicken or other database software. I like using spreadsheets as it allows me to see a clearer overview in a format that works well for me. I can easily adjust it to do any calculation I might need, but all my basic calculations are set up from the get go. I have one tab for each month. There are then 31 rows per month, corresponding with each day, wherein I enter my daily spending. At the bottom of each column are three fields. One is my budgeted amount for that category, next is the amount I have actually spent and finally the difference between the two. I also have fields for gross and net income, total expenses, total deductible expenses, etc.

I color coded all the auto calculating fields in shades of gray to indicate that the user(me) does not input anything there. These are all designed to take other information and perform calculations so that I know what my money is doing.

To begin the budgeting process, go to the "BUDGET" tab. There you will see a sheet where most of the fields are gray. This is because, with the exception of setting your budget numbers and category names, everything else is a calculation based on actual spending and earnings. Start by changing "Personal 1" with whatever the actual expense is, let’s say "Rent." This will populate all the monthly pages with "Rent" in that field. Continue with "Personal 2" and so on until all your fields are populated. You might have some empty fields, that is fine, nothing will be affected by an empty column or two. If you need more you have to do a tiny bit of work, but it is little more that adding a column and cutting and pasting the field data. Be sure to do that for EVERY MONTH or you will get some strange and frustrating results.

Once you have all your fields named it is time to enter your budget numbers. I spent the better part of a year tracking all my expenses before I made my first budget. This way the budgeting decisions were based on actual habits and not ideals. It would also be possible to rough in a budget using this system and then adjust every few months to reflect actual habits.

It is critical to not only include all spending, but also all savings. I will get into targeted savings accounts in a later article, but for now be sure that you include all your savings accounts on the budget. The ‘INCOME" fields work the same way except we do not enter a budget number. After income I have a totals field that gives me an easy reference for income and expense totals by month, quarterly, monthly average and YTD.

The last calculation at the bottom on the far left hand side of the spreadsheet is a little box called "Monthly Budget." This is your total budget including Personal and Business Expenses as well as Savings. This is your target number that you must earn every month. If the number is too high or too low, you can adjust your individual fields until you land on a number that works for you.

On the Monthly calculations you will see a field for "Total Intake" and "Earned Income." For the purposes of the template they contain the same range of fields. However, you will change these to suit your needs as some income fields will be earned income and others might be loans repayed or financial gifts. It is useful to know the total of all moneys incoming, but necessary to separate earned income from non-earned sources.

After the Income fields I have a little are I use to calculate tech and travel days. While the "tech days" are just for my own interest, the travel days are useful for tax time when calculating my away from home meal deductions. Entering an "x" in one day populates both the "tech" and "travel" columns, while a "y" is just a tech column. Obviously if you do not travel for work this is unnecessary and can simply be ignored, but I find it a lot easier than sifting through my calendar and counting out every day I am away from home or traveling.

There is a lot more that one could write on budgeting and I may well do so in future articles. For now, this is my introduction to how I approach budgeting as a freelance lighting designer.

I hope you find this useful. Please leave feedback as I am always interested in how this lands for you.

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Freelancing and the Abundance Mentality

Friday, June 12th, 2009

I have been thinking a lot about how I relate to my Lighting Design work recently. I am talking not about the aesthetics of the work, but rather the business model I operate under. When I was in graduate school I took out a (relatively) small loan to supplement my scholarship. I did this as a means of using money to leverage my opportunities by making it possible to purchase the most up to date drafting technologies, seeing the latest plays, operas, dances and so forth. My education was greatly enriched by that opportunity I gave to myself.

Over time however, that leverage became a burden. Despite the fact that I kept diligently paying off the loans, my attitude towards them shifted over time. The benefits I had garnered from the money were still present in my work and experience, yet I saw the loans as a drag on my earning. Without the immediacy of the experience, the focus shifted to the debt incurred in that action. My mentality towards work, again speaking strictly at a business level, went from generating income to paying off debt. While paying off debts is a good thing, I found that having that be the focus of earning money limits potential.

When I relocated to the Bay Area over six months ago I reached out to all the designers and directors I knew to get a sense of the landscape. One designer in particular stood out. This person told me, in no uncertain terms that there was quite simply not enough work to go around. The subtext being, why don’t you go back where you came from and leave the scraps to the rest of us. His response bordered on outrage and was quite surprising. Because this was one of my first encounters with a designer out here, his perspective colored my vision and everywhere I looked I kept seeing that scarcity.

In fact, the scarcity mentality that this designer was operating under was very likely the cause of his not finding enough work to be satisfied. The scarcity mentality is very closely related to that same idea of working to pay off debt rather than working to build wealth. Not too long ago I came to the realization that this way of going about the world was not only unproductive, it was counter productive. By focusing on paying off debt and looking out with a scarcity mentality I was unconsciously limiting my potential market.

What I have found myself doing lately is shifting my perspective from a debt oriented view to a wealth oriented view. In short, a shift from a scarcity mentality to an abundance mentality. The economy may be way down, we know this, but people are still hiring. Companies are still producing and lights still need to be designed.

Greed is the logical outcome of the scarcity mentality. Or perhaps the scarcity mentality is a product of greed. It is a hoarding tendency born from the fear of not enough. Many people want to earn high incomes not because of a desire for a better life per se, but out of a fear of not having enough. This may seem like the same thing, yet in fact they are diametrically opposed points of view. Those who want to earn high incomes out of fear, tend to be laden with debt, broke at the end of the month, and constantly worried about how they will pay their bills, regardless of their income level. Those who embrace an abundance mentality tend to have more than enough for themselves to live the life they want.

What I am interested in and what I am speaking to here is expanding the pie. I am no longer interested in seeking out scarcity and eeking out an existence to pay off debt. Rather I am interested in generating value and wealth to raise the quality of life for the people around me. Be that through creating beauty, donating to charity or taking a friend out to dinner. The scarcity mentality has for too long held me and my loved ones back. From experience I know that embracing an abundance mindset is the first step towards generating true wealth. The days of scarcity are over.

Standing in the knowledge that there is enough work has in the past, and I am confident will in the future, create that reality. Our world is shaped by our perceptions and only through a fundamental structuring of our outlook towards abundance, comfort and peace of mind can we truly create those things for us and our loved ones in our lives.

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Financing Freelancing

Thursday, July 3rd, 2008

Of all the classes I took in gradschool not one of them focused on how how to organize your finances. We had a CPA come in one day and talk about taxes, but nothing on day to day cash flow management. It is surprising since that is rather central to freelancing. And given that this is what a large percentage of their students end up doing, it surprises me there was no discussion of it. I had to make this system up on my own, via some help from talking with friends and colleagues. My system will not work for everyone, it may only work for me, but perhaps some of the ideas will be useful to others about to begin the freelance design experience.

One of the trickiest things I have found freelancing is budgeting my money. The switch from regular to irregular income can be quite a shock to the system if not prepared. It has taken me a number of years to get the system I have working with most major kinks ironed out, but it seems to be doing well currently. Since some months I will be working constantly with a fairly high and regular cash flow and other months are like a river evaporating in the desert I have adopted a system that works no matter what volume my monetary intake is at. Most of it is based on percentages and that allows my budget to expand and contract as the intake does.

Obviously I have fixed expenses like rent, gas, electricity, phone, student loan payments and internet. Thus there is a minimum I must make each month to not go into debt. By and large making those minimums is simple. Everyone has these expenses. They are obvious. There are a few other less obvious expenses that stung me a few times through my not considering them necessary.

For the system to work, taxes, savings and a “dry month buffer” should all be considered necessary expenses. By looking at these as necessary expenses I make sure I have them covered rather than waiting until the end of the month or end of the year only to find out I spent all my income.

Since I do not get W2′s there is no income withholding which means I must do that on my own. I am also under no illusion that I will “strike it rich” as a theatrical designer, so I have an IRA that I feed regularly. Both the taxes and the IRA follow the same model. As soon as I deposit each check for a project I take a percentage(currently ten percent) of that and put it towards my IRA(and to a savings account for taxes). So if I get a hundred dollar check that’s $10 to my IRA. A $3,000 dollar check and its $300. Simple.

The “dry month buffer” is less precise. Rather than a strict percentage I simply try and maintain about 1-2 months worth of necessary expenses in my savings account. This has been the most recent addition to my system and probably the one most needing of refinement. My next major tweak to the system is to make this more precise and methodical.

By doing all this before I even look at balances for necessary spending I have been able to save a decent amount of money on what can, at times, be a very meager income. There are two things that make this successful. One is knowing that almost anyone can adjust -10% of their income. It’s just enough to notice, but not significant enough to truly impact daily life.

One further trick I picked up from a friend of mine who uses a similar system has to do with money for taxes. In March he takes all his savings for taxes and puts it in a 9 month CD. In June does the same in a 6 month CD. And again in September with a 3 month.

It looks like an online savings account actually provides a higher rate of return than a short term CD. So this afternoon I will be opening an online savings account to hold my tax money until the end of the year.

The final element to the percentage system is discretionary spending. I give myself a monthly allowance, alternately called a flexible budget or spending plan, for excess income every month. By again treating it as a percentage of income I am able to allow it to expend and contract based upon earnings. And since all my credit card spending is accounted for in that spending plan I am able to pay off credit card bills at the end of the month(or weekly when I am really on top of things) to prevent that from getting out of control.

This all may fall into the over sharing category for some. But to me I would have loved to have this information at my disposal when I started working regularly on 1099 income. I hope this might help you out.

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the art of money

Saturday, December 15th, 2007

The other day imomus mentioned that when money people get together they talk about art and when art people get together they talk about money. The money of art is something that can be rather difficult to talk about. I think this is a primary reason professional artists generally have agents. Leave the money dealings to someone else so the artist can focus exclusively on the art.

But the business of art is very important. After all it is with money that food and shelter are procured. In the theatre the business of the art is at the fore. Unlike disciplines like painting or sculpture that one might do in seclusion and then, once completed, present to the market, theatre is done from the beginning in collaboration and those collaborators must agree on what fees are paid, to whom and when. They must agree as to who controls the rights to what and under which circumstances.

Working in the theatre it is necessary to be at once a “money person” as well as an “art person.” But often one is a “money person” without much actual money. Or at least with an income with as much fluctuation as the stock market. Since all my work is on a contract basis and my checks(portions of the total design fee) are paid on an irregular schedule it can be very difficult to organize this financial situation.

I am a big believer in saving and investing and find the typical American’s reliance on credit cards as a “cash reserve,” or worse yet supplemental income, to be reckless at best. At the same time, due to the often inconsistent nature of my work, I have at times been forced to use this less than ideal “cash reserve.” But how does one save and invest reasonably and responsibly with such a fluctuation in income?

What I have found to be of greatest use is to treat everything I make in terms of percentages. I do have fixed expenses, things like rent and utilities, so there is a minimum I must make each month. But after that, everything can easily be scaled to the amount of money I take in. I put away a certain percentage for taxes, and another percentage for savings. Then what is left over is free for all other expenses.

By dealing with my money on a check by check basis(as opposed to yearly or even monthly), I am able to save money during the leanest times. If I try to save ten percent of my income, when a thousand dollar check comes in I can take out one hundred dollars and this is not noticeable in the regular flow of things. Certainly not when compared with attempting to gather thousands of dollars at the end of the year to put in savings.

Breaking finances down to small easily manageable increments makes the whole thing a lot easier to understand. This is why I enjoy sites like Get Rich Slowly. It takes a reasoned approach to personal finance and breaks everything down into components that are easy to manage. So much so that almost insurmountable feats like paying off credit cards is broken down into five easy steps.

The business of art need not be something to fear. With a little planning and research even the most organizationally averse can practice the art of money.

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