A client asked if we had TCA classes in the works about how to set up business structures. I assured her, yes that class is coming, (So many classes are coming…)
Her specific concern was about how to handle money when it starts coming in from our creative work. Here’s a play-by-play of TCA’s simplest system for incoming money management.
Business systems are when we routinize a task to make sure everything is getting handled that needs to. Systems also free up time by increasing our efficiency around something we don’t do every day.
At TCA, we use a modified version of Mike Michalowicz’s Profit First methodology to mange money. We simplified and tailored it for Uninitiated Creatives who are just getting started.
- Set up two Bank Accounts specifically for your creative income. At this stage you probably aren’t bringing in a lot of money, so no need to worry about interest rates. One checking and one savings account is great; or two checking accounts works as well. Make sure there are NO fees or minimum balance requirements.
- Set up overdraft protection from one account to the next and vice-versa. This means if you run out of money in one account, it pulls money from the other account to cover the transaction. (You probably are never going to need this, but extra added precautions feel kind of nice right? It gives you a little confidence that you’re businessing in a real smart and responsible way, right?)
- Log in to your online banking and go to settings.
- Rename the two accounts. For the first account, I recommend names that remind you that your creative career is fueling this balance. Titles like: MONEY MY ART MADE or MY BOOKS PAY BILLS or CREATIVE CASH. (In business speak, this is technically an operating expenses account. Meaning this account covers the costs of operating your business.)
- For the second account, the title is: TAXES or TAXES DON’T TOUCH or TAXES NOT MY MONEY.
- Now add reminder percentages to the end of the title for both accounts. When starting out, use 30% for your first account, and 20% for your taxes account.* Your online account names would look like: MONEY MY ART MADE – 30% and TAXES DON’T TOUCH – 20%.
- On your TAXES DON’T TOUCH – 20% account go to the visibility setting and turn it off. Make the account invisible, so you don’t see it when you log in to the bank. You want to forget about that money because it’s not yours. Hiding it makes it less tempting.
- Every time you get paid for your creative work split the money according to your reminder percentage. Let’s say you get a check for $100.
- Deposit $20 in your TAXES DON’T TOUCH – 20% account. Always pay the tax account first, remember it’s not your money. It’s the governments, you’re just holding onto it for a hot minute. The only time you take money out of this account is to pay tax bills.
- Deposit $30 in your MONEY MY ART MADE – 30% account. That account pays for art supplies, or web hosting, or a new computer, or a guitar, or studio space. Your creative money account funds your future creative projects.
I know you’re thinking, that’s only 50% of the money, though; where’s the other $50 go?
It goes to you! It’s your paycheck. Which leads us to the final step.
5. Spend your paycheck however you want or need to. Use that $50 to pay a bill. Buy some groceries. Stash some in savings. Go out to dinner with friends.
Your creative talent earned that money. Your creativity wants to financially support your whole life not just the creative part of it.
*These percentages are based upon United States Tax Structure. Modify as applicable in different countries.
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by Jessica Conoley