Effective Financial Planning Tips for Independent Artists

Published on 7 August 2023 11 min read

Create a financial plan
Track your incomes and expenses
Plan for taxes
Set up an emergency fund
Invest in your art business
Diversify your income streams
Get insured
Plan for retirement
Educate yourself on financial management
Seek professional advice

As an independent artist, managing your own finances can feel like painting a masterpiece with no blueprint. But just like a well-executed canvas, successful financial planning for independent artists requires patience, precision, and creativity. This blog post will share some practical tips to help you navigate the financial landscape, so you can focus more on your art and less on your accounts.

Create a financial plan

Creating a financial plan is the first step towards achieving financial stability. Think of it as sketching the outline of a painting before filling in the details. Here's how you can get started:

Estimate your income: Most independent artists have variable income streams. You might make money from art sales, commissions, teaching gigs, or even royalties. Try to estimate how much you'll earn from each source in the upcoming year. Remember, it's better to underestimate than overestimate.
Calculate your expenses: Next, calculate how much money you spend every month. Include both fixed expenses (like rent or mortgage payments and utilities) and variable expenses (like art supplies or travel costs). Be sure to account for less frequent expenses, like annual insurance premiums or equipment replacements, too.
Set financial goals: Now that you have a clear picture of your income and expenses, it's time to set some financial goals. Maybe you want to save for a new studio or invest in a high-quality camera. Whatever your goals are, write them down and figure out how much money you'll need to set aside each month to reach them.
Make a budget: Finally, use your estimated income, calculated expenses, and financial goals to create a budget. This is your financial roadmap—it shows you where your money needs to go every month. Stick to it as closely as possible, and adjust it as needed when your income or expenses change.

Remember, financial planning for independent artists isn't a one-time thing—it's an ongoing process that you'll need to revisit regularly. But with a solid plan in place, you'll have a much clearer path towards financial stability and success in your art career.

Track your incomes and expenses

Once you've drawn up a budget, it's important to keep track of your actual income and expenses. Think of it as a progress report for your financial plan. It's like taking a step back from your canvas to see how your work is shaping up. Here's how you do it:

Record your income: Every time you earn money, write it down. Include the date, the amount, and the source of the income. You can use a simple spreadsheet or a budgeting app. This will help you see how closely your actual income matches your estimated income.
Log your expenses: Do the same for your expenses. Write down everything you spend money on, no matter how small. This will help you see if you're staying within your budget, and where you might need to cut back.
Review regularly: Set aside time each month to go over your income and expenses. This is a chance to see where you stand financially and make any necessary adjustments to your budget.

By tracking your income and expenses, you're not just keeping an eye on your financial health—you're also gathering valuable information. This data can help you make informed decisions about your art business, like whether it's the right time to invest in new equipment or hire an assistant. In a sense, it's like studying the techniques of other artists to improve your own craft. So sharpen those pencils, get out that ledger, and start tracking!

Plan for taxes

As an independent artist, you're not only in charge of creating your art, but also managing the financial side of your business. And that includes planning for taxes. You're probably thinking, "Taxes? That's as exciting as watching paint dry!" And you're right, it's not the most thrilling part of financial planning for independent artists, but it's a key piece of the puzzle. Let's get into it:

Understand your tax obligations: As an independent artist, you're considered a small business owner. That means you're responsible for paying your own taxes. This includes income tax and self-employment tax, which covers Social Security and Medicare.
Save for taxes: A good rule of thumb is to set aside 25-30% of your income for taxes. It might seem like a lot, but it's better to save too much than not enough. You don't want to be caught off guard when tax time rolls around.
Track your deductions: As a business owner, you're entitled to deduct certain expenses from your taxable income. This includes things like art supplies, studio rent, and even a portion of your home if you use it as your workspace. Keep track of these expenses throughout the year—it'll make your life a lot easier when it's time to file your taxes.

Planning for taxes might not be as fun as splashing paint on a canvas or molding clay into a masterpiece, but it's just as important. By understanding your tax obligations, saving for taxes, and tracking your deductions, you're setting yourself up for financial success. After all, no artist wants to see their hard-earned money go to penalties and interest because they didn't plan for taxes.

Set up an emergency fund

Let's face it, the life of an independent artist can be unpredictable. One moment, you're selling pieces left and right, and the next, you hit a dry spell. Not to mention, accidents or unexpected expenses can pop up at any time. That's where an emergency fund comes into play. Now, you might be asking, "What's an emergency fund?" Well, I'm glad you asked:

An emergency fund: This is a separate savings account where you stash money for, you guessed it, emergencies. It's not for splurging on a fancy new easel or the latest graphic design software. It's for unforeseen expenses like a flat tire, a leaky roof, or a sudden illness.
How much to save: A good rule of thumb is to aim for three to six months' worth of living expenses. This gives you a financial safety net in case you lose your income or face a large, unexpected expense.
Building the fund: This is a marathon, not a sprint. Start by setting aside a small amount from each sale or payment you receive. Don't worry if it feels like it's taking forever—remember, slow and steady wins the race.

Setting up an emergency fund is a critical step in financial planning for independent artists. It might not feel exciting, but think of it like this: it's a safety net that lets you take creative risks without worrying about financial fallout. And that's a win for any artist!

Invest in your art business

Now, let's move on to another key aspect of financial planning for independent artists—investing in your art business. You might be thinking, "Invest? But I'm an artist, not a stock trader!" Don't worry, investing in this context doesn't mean playing the stock market. It's more about spending money wisely to grow your art business. Here's what you need to know:

Buy quality materials: It's tempting to cut corners and buy cheaper materials. But remember, your art is your product. Using top-quality materials can make a big difference in the final result - and that can translate into higher prices and more sales.
Upgrade your tools: Whether you're a painter, a sculptor, or a digital artist, your tools are your lifeline. Don't hesitate to invest in the best tools you can afford. They'll not only make your work easier but also help you produce better work.
Improve your skills: Never stop learning. Take workshops, attend webinars, or enroll in online courses. Investing in your skills is one of the best ways to ensure your art—and your income—continue to grow.
Market your work: You could be the next Van Gogh, but if nobody knows about you, you won't sell much. Spend some money on marketing, whether it's creating a professional website, running social media ads, or hiring a PR agency.

Yes, investing in your art business requires spending money. But remember, these aren't just expenses—they're investments that can help you earn more in the long run. So next time you're working on your financial planning, don't forget to include a budget for investing in your art business.

Diversify your income streams

Okay, let's chat about income diversity. When you hear "diversify your income streams," you might think it sounds like Wall Street jargon. But it's pretty simple and super useful in the world of financial planning for independent artists. Essentially, it means don't put all your eggs in one basket. So, how do you do that? Here are some ideas:

Sell prints or merchandise: Original pieces are great, but they take time and can be expensive. By selling prints or merchandise like t-shirts or mugs with your art, you can reach a wider audience at a more accessible price point.
Teach: Share your knowledge and skills with others. You can run workshops, offer private lessons, or even create an online course. It's a nice way to earn extra income and build your reputation as an expert.
Commissions: Custom work can be a great source of income. Advertise that you're open for commissions and let your fans and followers know they can have a unique piece created just for them.
Licensing: Allow businesses or individuals to use your art in their products or marketing. You'll get a fee for each use, and it can be a great way to get your work seen by a larger audience.

Remember, diversifying isn't about doing everything at once. It's about finding different ways to bring in income so if one source dries up, you've got others to fall back on. It's an important part of financial planning for independent artists, so give it some thought!

Get insured

When it comes to financial planning for independent artists, it's easy to overlook insurance. But think about it. What if your art studio catches fire, or your expensive camera gets stolen? It's a tough pill to swallow, but these things can happen. And when they do, insurance can be a lifesaver.

There are many types of insurance that can be relevant to you, such as:

Property insurance: This can cover your art studio and equipment against damage or theft. It's not just about the cost of replacing everything—think about the income you could lose while you're unable to work.
Liability insurance: Imagine someone gets injured while visiting your studio, or you accidentally damage a client's property while installing a piece. Liability insurance can protect you from the costs of these incidents.
Professional indemnity insurance: This covers you if a client isn't happy with your work or if you make a mistake. For instance, imagine you misquote a commission price and the client demands a refund. Professional indemnity insurance can help you handle these situations without a huge financial hit.
Health insurance: As an independent artist, you might not have the luxury of employer-provided health coverage. But healthcare costs can be high, and an unexpected illness or injury can derail your finances. So, consider getting a health insurance plan that suits your needs and budget.

Insurance might seem like an unnecessary expense, especially when you're trying to keep costs down. But in the long run, it can save you a lot of stress and money. So, it deserves a spot in your financial planning for independent artists.

Plan for retirement

Retirement planning might not be the most exciting topic for independent artists, but it's one that can't be ignored. One day, you might want to swap your paintbrushes or camera for a more relaxed lifestyle. When that day comes, you'll be grateful for every penny you put away.

When it comes to retirement savings, starting early is key. Even if you can only afford to save a small amount each month, that money can grow significantly over time thanks to the magic of compound interest. Here's how:

Open a retirement account: Consider options like a Traditional or Roth IRA. These accounts offer tax advantages that can help your savings grow faster. For example, Roth IRA contributions are taxed when you make them, but withdrawals in retirement are tax-free.
Set a monthly savings goal: This doesn't have to be a large amount—start with what you can afford. Remember, every bit counts when it comes to retirement savings.
Invest your savings: Don't just let your money sit in a savings account. Consider investing it in a diversified portfolio of stocks and bonds. This can help your money grow faster over the long term, though it also involves some risk.
Automate your savings: Make saving for retirement a habit. Set up automatic transfers to your retirement account every month. This way, you won't forget to save and you won't be tempted to spend the money on something else.

Financial planning for independent artists should always include a plan for retirement. It might seem far off now, but remember: the sooner you start saving, the more comfortable your retirement could be. And who doesn't want that?

Educate yourself on financial management

Hey, we get it—financial jargon can seem like a different language. But, as an independent artist, understanding the basics of financial management can make a world of difference. It's not about becoming a Wall Street guru, but rather knowing enough to make informed decisions about your money.

There's plenty of resources out there to help you brush up on your financial knowledge. Here are a few steps you can take:

Read finance books: There are tons of books out there that break down complex financial concepts into easy-to-understand language. Books like "I Will Teach You To Be Rich" by Ramit Sethi or "The Total Money Makeover" by Dave Ramsey can be a good starting point.
Take an online course: Websites like Coursera, Udemy, and Khan Academy offer free or inexpensive courses on a range of finance topics. You can learn at your own pace, in your own time.
Listen to financial podcasts: If reading's not your thing, podcasts can be a great alternative. They are a fun and easy way to learn about money management while you're on the go.
Join finance-focused social media groups: There are countless online communities where people share their financial experiences, tips, and advice. They can be a great source of real-world insight.

Remember, financial planning for independent artists doesn't have to be overwhelming. Taking small steps to educate yourself about money management can go a long way. After all, knowledge is power, especially when it comes to handling your hard-earned money.

Seek professional advice

Even the most financially savvy artists can benefit from professional advice. It's like trying to cut your own hair—it's possible, but a trained stylist probably does a better job. Similarly, financial advisors have the skills and knowledge to help you make the most of your money.

But where do you find these finance wizards, and how do you know they're right for you? Here's some advice:

Look for certified professionals: Certified Financial Planners (CFPs) and Certified Public Accountants (CPAs) have to meet certain education and experience requirements. So, you know they're qualified.
Ask about their experience with artists: Not all financial advisors understand the unique challenges of financial planning for independent artists. Look for someone who has experience working with clients in the arts.
Check their fee structure: Some advisors charge a flat fee, some a percentage of the assets they manage for you, and others work on commission. Make sure you understand how they're paid before you hire them.
Trust your gut: Just because someone has all the right qualifications doesn't mean they're right for you. You need to feel comfortable with them, trust them, and be able to communicate openly.

Remember, you don't have to navigate the world of financial planning for independent artists alone. Professional advice can be a worthy investment, helping you to avoid costly mistakes and make the most of your artistic income.

If you're an independent artist looking for more financial planning tips, we recommend checking out 'Crowdfunding for Independent Artists 101' by Sameera Maruvada. This workshop will guide you on how to fund your artistic projects effectively through crowdfunding and is an excellent resource to supplement the financial planning advice provided in this blog post.