Sourced from NPR | March 2, 2022
Image by Paco de Leon
Every hobby needn’t be a side hustle.
If you set out to make money off of yours, congratulations! You're running a business! Now, you have to pay attention to finances. It can be uncomfortable taking something you do for fun and turning it into something of value, especially if you are a creative person. Being financially savvy is antithetical to being a true artist, so it is no wonder many creatives feel "bad with money."
When you ignore your finances, you are not only missing out on peace of mind, but you are also losing the ability to make sound business decisions that come from a place of clarity rather than an emotional "I'll take what I can get" energy.
Writer, illustrator, and musician Paco de Leon operates a financial education firm and bookkeeping agency. Her book, Finance for the People, is a beginner-friendly guide to navigating your financial life. De Leon recently joined NPR’s Life Kit to offer her best money management tips for creatives.
Musician, author, illustrator
Paco de Leon is the founder of The Hell Yeah Group and author of Finance for the People.
Left: Penguin Life; Photograph by Jean Pablo
Set up weekly finance time
Whether you are following up on invoices, logging expenses, paying bills, or researching accountants, many financial chores are often missed and forgotten if we don't take time to prioritize them. To avoid this, set up a weekly finance meeting with yourself and treat it as sacred. Spend anywhere from 20 minutes to an hour to check things off on your list, instead of doing them only when you remember.
"Don't allow people to book meetings or bother you during that time," says de Leon. "Having that space to focus will allow that part of your life to expand."
Graphic: Paco de Leon
Separate your personal and professional finances
It's easy to neglect your finances if all your money is kept in the same account and your transactions aren't marked as personal or professional. So, bank with your business in mind. Monitor your money and watch how it's being used by creating separate checking and savings accounts for your personal and professional finances. Budgeting for your business becomes a lot easier when you have a clear idea of what you're actually spending and earning.
It might feel a little scary since there's no money flowing in. But, it can also feel good to look at your stagnant accounts and ask "How am I going to water this and grow my balance?"
Don't forget your taxes
Another reason for separating your professional and personal finances is that it will be way easier for you to report your earnings to the IRS, regardless of the amount you make. If you make more than $400 a year, you will likely have to pay both income tax and self-employment tax. To prepare for this, you can save anywhere from 10-30% of the money you earn and put it into your business savings to prepare for tax season. If preparing for taxes is scary or stressful for you, consider hiring an accountant. The U.S tax code is thousands of pages long and often changes. Hiring someone to help you navigate can help provide a huge return on your investment in terms of how much it costs.
Know your market
Just because you enjoy making photographs and your friends like them on Instagram doesn't mean you should buy a domain name, produce hundreds of prints and set up an online shop. You have to understand if there's a demand for what you offer. Ask yourself questions like "Whose problem am I solving?" and who is looking for this service and why.
From an artistic perspective, it might feel strange to frame your work as a solution to a problem. If you've decided that you want to put your work in a commercial space, consider and think about who you are trying to reach, who's going to buy your work, and what they are willing to spend.
To demystify pricing, consider concrete and abstract costs
Pricing your products or setting your rates is hard and can be difficult to navigate. Pricing requires you to consider factors such as the cost of your materials, workspace, the value of your time, and your level of experience. What you can offer that no one else can.
If all of the above sounds a bit overwhelming, remember the pricing falls within a range. There's a low and high end for every service and product on the market. Ask your peers online and get a sense of what those limits are and reflect on where you want to be in that range and why.
Know when to ask for help or raise your prices
If you are earning revenue from a skill or product, you might be doing a bunch of other things too like souring, marketing, shipping, and bookkeeping. Pay attention to the tasks that feel difficult. What slows you down, burns you out, or takes up so much time that you'd rather spend it doing (any)thing else. It might be helpful to outsource this task.
If your time becomes more valuable, it might be time for you to raise your prices and see what happens!
