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If you are looking into making art your full-time job, a side-hustle, or just making art for fun you are going to be dealing with money at some point. In that position, it is important to have a strong grasp of where your money is coming from and where it is going.
Before you decide to become a self-employed artist, you have to consider if you can realistically afford to take that dive. Being self-employed is a challenging path and it’s only more complicated if you don’t have the financial stability to back it up. But you won’t know until you try.
The best start is to sell your art while you still have another income stream and later on you can switch to becoming a full-time artist.
This way you can gain an understanding of how to price your work better and if there is any demand for your art, to begin with. You’ll be happy to have known this before going full-time because it will make your business run more fluently and you won’t be worried about covering your regular expenses.
Before you fully dive in, it is good to do a “SWOT” analysis. This is a technique that businesses use to discover new opportunities and reduce potential hazards.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threads.
A beginning and periodic inventory of your art business that will help you track the status of your finances and your business's growth.
Here are some questions you need to ask yourself:
STRENGTHS
What advantages do you have? Are you in a good location geographically? What skills do you possess, along with social or professional connections? What unique low-cost resources can you draw upon? What is your competitive edge? What do you do differently or better than everyone else?
WEAKNESSES
What aspects of your art business could you improve? What factors lose you time, sales, or peace of mind? What are successful artists doing that you are not doing?
OPPORTUNITIES
What new opportunities in the market or to reach new markets are becoming available? What opportunities did I pass, but are still available? What would be the ideal opportunity?
THREATS
What obstacles do you face on an ongoing or continual basis? Are changing market conditions or technologies threatening your income or the way you work? Do you have debt or cash-flow problems?
Here are also some other questions you need to ask yourself before diving all in:
What are my own personal financial needs?
What are my business financial needs (materials, space, shows…)?
How many ways can I earn money from my art business?
In what ways can I barter/trade my artwork for other services (like photography, marketing, etc.)?
Is crowdfunding an option for bigger expenses?
What financial system can I set up to best organize and manage my business?
What grants/fellowships are a good fit for my work?
What work have I made that has been successful?
Who is my current customer?
Who is my ideal customer?
The basis of financial freedom is knowing where your money is coming from and going to.
KEEP YOUR ART BUSINESS AND PERSONAL FINANCES SEPARATE
It makes things way easier to have your personal account and your business account separate.
This way you can easily see where your money is going, and you can get an overview of your business right away. Plus, you don’t waste time filtering through line-by-line to extract all your personal line items when doing taxes or anytime you need to get some insight into your business revenue.
There are services available for artists that will help you with keeping track of your profits and losses, such as QuickBooks and Artwork Archive.
They have features that allow you to track sales, workshop fees, and any other income and expenses for your art business. You can get quick insights into how your art business is performing, generate invoices and stay on top of your budget.
UNDERSTAND HOW YOUR MONEY IS FLOWING IN AND OUT
Having an art inventory system that allows you to keep records of your artworks, sales, and finances, in general, is the foundation of good business practice.
When you set up your inventory system, you’ll be able to clearly see what all your revenue and expenses are over time. With that information, you can then predict your income for the upcoming months, explore what expenses you could cut down on, see what type of work is selling well and make more of that, and brainstorm different ways to add to your income.
Having a system allows you to lay everything out in front of you and make decisions about your further movements.
Using an inventory system like Artwork Archive makes it easy to record your artwork, invoice your customers and keep track of your sales over time.
SHORT-TERM AND LONG-TERM SAVINGS GOALS
Having goals inspires you to save in new ways, it makes you want to put your money away for that goal. You will also think twice before spending it on trivial stuff.
Setting goals will help you make savings for bigger projects, such as a new studio, new equipment, an upgrade on equipment, and so on, much easier.
It might be hard to think about setting money aside for retirement when you feel like you don’t even earn enough today. However, even small amounts of money put away on a regular basis can be very effective over time. Even amounts as small as ten or twenty dollars will add up and grow over time.
One of the fastest ways of getting there is to reduce your debts as a part of your savings plan. Since artists have some of the highest student debt in the USA. It is best to pay it off first, this way the interests don’t build up and eat away your newfound business.
NOT LEARNING ABOUT FINANCES UNTIL IT BECOMES AN EMERGENCY
Dealing with finances isn’t the main concern for most artists until it becomes an emergency. It could be a small emergency like your car breaking down, or not having enough money for taxes, medical bills, or retirement.
Ignoring your finances will only create difficulties in the long run.
Keeping track of your receipts, documenting your income and expenses, and planning for retirement is vital to your long-term success. As an independent artist with a small business, it is essential for your long-term plans to start with a retirement fund as soon as possible.
Check on your finances frequently and don’t wait until the tax season comes. This way you can prevent emergencies.
KEEP A 50/30/20 BUDGET
This budget is based on three simple categories:
OBLIGATIONS (how much you have to spend on regular bills, rent, recurring bills, etc.)
DISCRETIONARY (any time you pay for a thing out in the world, like food, wants, luxury items, etc.)
SAVINGS (the money that you don’t spend each month, which is building up your financial security, such as debt repayment, emergency fund, retirement investments)
Before you decide to be a full-time artist you need to figure out if you can afford it in the first place.
To figure that out, take all your personal financial obligations, add them up, and then double the number. This number is after you’ve paid taxes on your income, and after you’ve paid for any expenses like studio rent, supplies, etc.
It might seem impossible and hard but running a small business is not a stroll through the park. You need to constantly work on it. The key is to be patient and keep your finances under control. Constantly grow your art business and you’ll get there.
