This information is located in our software for artists. Some references within the text will be software related.
 
For many artists, dealing with finances is not a top priority until a financial emergency strikes.  It is typical for artists to not receive a steady paycheck and so it is vital that artists understand their income, their debt, their taxes and their savings.
 
Always balance your checkbook, and keep track of your receipts.  It is a good idea to look over your finances before the end of the year, instead of April of the next.  You may need to make adjustments to your budget, by either saving some of your income or spending it on tax-deductible items for your business.
 
PLAN AHEAD

You should know how much money you make from your career on a historical and annual basis.  You should also have an idea of what you would like to make each year.  You can take steps to plan ahead towards your goal.
 
You should also know your annual expenses.  How much of it goes towards your art career?  How much do you spend on other items?
 
Doing a career-focused budget is a smart plan. This should include expenses such as proposals, archival material, business expenses and, of course, the material costs of producing new work.
 
A budget for your exhibition or project might indicate the need for a new and/or more economical strategy.  Knowing this ahead of time can save you money as well as time and aggravation.  It does not look good for you to have to postpone a show or change your work at the last minute because of financial concerns that are avoidable. 
 
PLAN WAY AHEAD

Since many artists are self-employed, they must determine long-range plans.  This includes a retirement plan.  When you sell a work, put some of the income away in a safe place, such as a retirement account, bonds or savings plan.  It is never too early to start saving!
 
LIVE ON LESS

Think twice about the way you spend money.  Instead of buying a fancy vehicle or long vacation, consider doing something with less money and saving the rest.  Living modestly does not mean living in poverty, but rather a good balance of saving and spending.  You have to plan with both emergencies and retirement needs in mind.
 
It is recommended that a person with a steady paycheck put away eight to twelve months of income in case of emergencies.  If you are in the arts, it is suggested that you try and put away three years worth of income.  This recommendation is not exaggerated, but rather based on prior experience of countless artists.
 
CREDIT CARDS

Credit cards can get you into trouble faster than almost any other financial issue.  Instead of buying lots of art supplies and exhibition materials on credit, consider postponing an exhibition or changing the work. If you cannot pay the bill at the end of the month, reconsider buying it in the first place.  If you get into debt, you will not be able to make work in the future, and it could kill your art career.

KEEP RECEIPTS

If you ever get audited, you will need to prove your expenses with receipts.  Always keep your receipts and try not to throw them in a drawer until tax time.  Set aside one day a month to balance your checkbook and keep track of your expenses and income.  It will save you a lot of time at the end of the calendar and/or tax year.
 
ACCOUNTANTS

If you need an accountant, make sure that you find an accountant who understands the arts.  Many artists either get into trouble with the IRS, or are missing the benefits of tax deductions, because they are using an accountant who is not savvy about the laws that affect artists.  That expense can be taken off your taxes next year.
 
PAY ON A QUARTERLY BASIS

About one third of your income will go to taxes.  In addition, you may need to pay Social Security, which is 15 percent.  If you do not have an employer, you will need to pay all of this yourself.
 
Paying quarterly taxes means that you pay quarterly amounts up-front.  This spreads your tax obligations out over the course of the year, which is helpful for high-income earners.  If you do not make a lot of money, you will get a partial refund.  When you get the refund, consider putting into savings or paying off a debt.
 
INSURANCE

Having health insurance is something that many artists feel they cannot afford, but is financially prudent.  Price compare group plans against individual and small group coverage.
 
Renters insurance can also be an important investment in the case of fire, floods or earthquakes.
 
INVESTMENTS

Investing is not just about buying stocks.  An investment is something you put resources into with the expectation of a return.  Putting money into a savings account will result in interest, albeit relatively small.  Research other kinds of accounts that may increase your gains.  Be sure to understand the level of risk you undertake when investing.
 
Investing can also be something invaluable that you do for your own personal development, such as workshops and classes or maintaining your health.
 
SAVING CASH UNDER THE MATTRESS

If you save your money with no chance of a return, you will lose about five percent a year due to inflation.  You also might forget which mattress you hid your money in, or it may burn up due to a fire.
 
SAVINGS ACCOUNT

There is a low risk, but low rate of return, from savings account, and many do not keep up with the rate of inflation. 
 
BANKS

Most banks are covered by depository insurance (they will say “FDIC insured”). However, FDIC insurance only covers a certain portion of savings. Always check your bank’s insured amounts.
 
CERTIFICATE OF DEPOSITS (CDs)

Certificate of Deposits usually have a higher rate of return than a regular bank account because they tie up money for long periods of time.  There is usually a penalty for taking money out of the account before the time limit is met.  Some types of CD’s are insured, and they are generally a safe investment.
 
SAVINGS BOND

Risks vary with savings bonds. Federal bonds usually carry a low risk, but do not carry a high rate of return and do not offer immediate access to cash.
 
SAVING YOUR PENNIES

Precious metals are speculative and run a high risk, as the value can go way up or down. If you are Inexperienced or uncertain about this commodity, then do not pursue an investment.
 
STOCKS

You can invest in a private company (this company does not sell shares on the stock market) or a public company (this company sells shares on the stock market) but be aware that stocks carry a lot of risk.  If the company you invest in goes under, so does your money.  Most advisors recommend that you educate yourself before playing the stock market without professional guidance.
 
MUTUAL FUNDS

Mutual Funds are a collection of stocks from many different companies. The idea is that if one company loses, then the rest of the companies balance the loss.  Most retirement accounts are invested in mutual funds.  They are meant for the long haul, and meant to grow over time.  If you can afford to live without a portion of your income for the short-term, this might work for you.
 
REAL ESTATE

Buying a home can entail lots of risk because you must make your payments on the loan or else lose the property. However, a home usually appreciates in value.  There are tax benefits associated with owning a home. As with all investments, research is essential.
 
INVESTING IN A PROJECT OR BUSINESS

This is considered a high-risk venture because it can have a high return.  It might give you a new career or a lot of job satisfaction, but be cautious, well informed, and plan ahead before considering such a move.
 
GETTING YOUR FINANCES ORGANIZED

Here are some tips for keeping your finances organized.
 
SEPARATE CHECKING AND CREDIT CARDS

Keep your personal and artistic finances separate. Dedicate a separate checking account and credit card just for your artistic income and expenses. Use the artist account to pay for artistic supplies, research materials, marketing expenses, licenses, etc. Deposit any income you make from your artistic endeavors into this checking account.
 
MARK YOUR RECEIPTS

Each time you get a receipt make a note directly on the receipt about the purchase and what it was for (such as art supplies, copies, parking for meetings or a workshop).  Make a habit of putting your receipts into a daily file.  Once a week, file these receipts after entering them into an accounting program on your computer, or into Income and Expense Charts.  Set up categories that you use often for your artistic practice such as Supplies, Office, Studio Rent or Research.
 
TAXES

See the Taxes section, or search the web, to learn about tax deductions that you may be eligible for because of your art practice.
 
 
RESOURCES

Ask Artemisia
Dr. Art on Buying a Home
Part 1: How Much Can You Afford?
Matthew Deleget, Information & Research Department, NYFA
www.nyfa.org/archive_detail_q.asp?type=6&qid=57&fid=6&year=2002&s=Spring
 
Mini Financial Plan for Artist
Walks you through several steps on financial organization: Beginner’s Financial Planning, Risk tolerance Questionnaire, Gathering Information, Income and Expenses Budget Calculator, Setting Goals, and Debt Management Calculator.
http://starvingartistguide.com/financialplanning/financial_plan_for_artists.asp
 
Free Credit Ratings
This central site allows you to request a free credit file disclosure, commonly called a credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion.  You can also request your report by phone or mail.  Monitoring and periodically reviewing your credit report is an effective tool in fighting identity theft. 
 
Be aware that checking your credit too often will result in your credit rating going down so plan accordingly.
 
www.annualcreditreport.com