The thought of numbers, budgeting, or bookkeeping may bring on a wave of anxiety. You might tell yourself, “I’m just not a numbers person,” or “My income is all over the place” or “It’s all just so overwhelming!”
All of those things can be true.
Practically speaking, nowadays we have so many options with software and banking tools that most artists don’t need to spend more than one day out of each month to keep on top of their finances. However, everyone in the world that has some form of business should have a basic level of financial literacy.
If you can add and subtract, you’ve got this!
If you can measure a canvas to fit around stretchers, you’ve got this!
If you can figure out how much plaster you need for a sculpture, you’ve got this!
Personally, I find measuring out material for a work or squaring a canvas more challenging than my accounts, but that’s because there is software that does the heavy lifting.
Financial literacy is not a personality trait. Nor is the lack of it a character flaw or something to be ashamed of. It is a practical skill, just like stretching a canvas or mixing plaster. Designing a financial structure to support your life and your practice feeds your creativity. Once you’ve set up a system, it runs in the background allowing you to focus on what you really want to spend your time doing – being an artist!
AMM offers specific support for emerging artists to set you on the right track for the rest of your career. If you’d like to build confidence around your finances, explore our 90-Day Financial Literacy Bootcamp.
Budgets vs. Projections: The Guiderails on the Artist Roller Coaster
If you’ve ever felt like your finances are a roller coaster you didn’t sign up for, you’re not alone. Most artists and freelancers live with irregular income. Some months are flush, others are frighteningly lean. The feast or famine cycle is so real! It can make the idea of budgeting feel pointless. Why plan when everything is unpredictable?
However, budgeting for irregular income isn’t about predicting the future with certainty. It’s about giving yourself guide rails so that when the ride gets bumpy, you don’t fly off the tracks.
Two terms that often get used interchangeably, but shouldn’t be, are projections and budgets. Understanding the difference between them is the first step to getting your finances under control.
A projection is a forecast.
It’s a fancy way of saying, this is what I want my money to do. It’s your best estimate of how much money you expect to come in or how much something should cost. Projections can be based on your previous financial records, your current situation, or your desired expectations. That last one, desired expectations, is the riskiest kind. It is best to keep these figures conservative. Overestimating your income is one of the most common financial mistakes artists make. Something tech startups still haven’t learned.
A budget is slightly different.
A budget is your limit. It is a set of rules that you set up in advance and then track against in real time. Often it is based on projections. It’s not just a wish list. It is a commitment to yourself about what you will and won’t spend. Where a projection asks “what do I think and want to happen?”, a budget asks “what do I need to happen?”
The most useful approach is to use both together. Start with a projection based on your past income and expenses, then use that to set a realistic budget. Review it monthly. Adjust when reality diverges from the plan, as it inevitably will. Your budget is a living document. It’s allowed to change. Just make notes of why you changed something so you can learn from the past to better project your future.
Read next: The Myth That Artists Can’t Handle Money