This page is meant to discuss the personal finance and planning involved for freelance artists. If you need a reminder (or a first time introduction) on how money works, consider brushing up on the fundamentals with these e-learning videos developed by the Chang School at Ryerson University and the Financial Consumer Agency of Canada. They will help boost your financial acumen on topics such as budgeting, credit, debt, saving and investing, financial planning, and protecting yourself from fraud. You will find more resources created specifically for artists and/or creative freelancers at the bottom of this page.
Many artists have a variable income. Having a variable income means you do not make your living by having a consistent regular paycheque. If you are an artist working on a project-by-project basis, with contracts of varying amounts, and your income is dependent on the timelines of your multiple projects, then you live with a variable income. A variable income can be challenging because most of anyone’s major living expenses are set amounts due at regular intervals. This means it requires more work and planning for you to manage your income against your living expenses. The good news is you can use your producing skills to manage your variable income.
It is integral that you keep track of the hours you work on each project, even when you are producing for yourself. It's worthwhile to take a step back at the end of, say, producing a show, and add up the hours you spent on it - that can help you plan your time more effectively in the future. It's also important to track your hours on a project when you are invoicing someone for your time.
A few easy ways to do this are:
- Creating events/blocks of time in iCal so you can block out the time ahead of time.
- Creating a spreadsheet that you fill in every time you work on a project.
- Use a time tracking app like Toggl (which is highly recommended by Generator staff).
- Prioritize your projects. Ask yourself: What project carries the most weight? Which one is paying you the most? What grant has the most pay off if it's done well?
Just like you would build a budget for your show, you can make a budget for your life. If your life was a show, how much does it cost to run it every month?
Determine your monthly set expenses. These are any recurring bills you have to pay every month - rent, internet, phone, car payments, transit pass, gym memberships, netflix subscriptions, bank fees, loan/debt payments, etc.
Estimate your monthly variable expenses. These are amounts that might change from month to month - groceries, gas, clothing, coffees, meals out, entertainment, and so on. Set them at round numbers you think reflect your habits.
These are expenses that don’t come up every month, but are significant enough that you know you can expect to be spending this money every year. You can look to the year ahead and know approximately how much you will spend on certain areas of your life:
- travel (personal trips and vacations)
- charitable donations
- medical and dental
- birthday gifts, special occasions
Whether you are a registered business or not, as an artist producer you have business expenses. It is important to keep track of these expenses for tax time but it is also important, wherever possible, to plan for these expenses before they come up. You know every year you have to spend money on certain things in order to do what you do:
- union dues, membership fees
- workshops, training
- headshots, website costs, agent retainer
- supplies (plays, books, materials)
Here is a basic formula to determine your total monthly costs:
|(Set Monthly Expenses + Fluctuating Monthly Expenses)|
|+ (Personal + Business Annual Expenses)|
|/ 12 months =|
|The cost to run your life each month|
Once you know this monthly expenses number, you have a better idea of how much money you need each month to live.
To figure out roughly how much you make monthly you can look at your previous year's income tax return, or use a formula like this:
|(Add up all the contracts you had last year/or the year ahead)|
|/ 12 months =|
|Your average monthly income|
Think of this as your monthly revenues.
Hopefully, your monthly expenses and your monthly revenues balance.
If your "monthly expenses" seems astronomical (or just unrealistic) compared to your "monthly revenues", you may need to find ways to lower some costs OR increase your earnings. The goal is not to run a deficit, you need to have at least this total monthly expenses amount available in cash each month.
When you make a variable income, you may find one month your actual monthly revenues is only enough to cover 50% of your monthly expenses while the next month your monthly revenue is double your monthly expenses. Some months I feast and some months I famine. What do I do?
A strategy to avoid the Feast or Famine problem is to start working with a buffer for yourself.
If your combined income one month is more than your monthly expenses, you can start putting your surplus towards the next month(s) to build your buffer. Having a surplus one month doesn't mean you can spend more money that month. Stick to your budget. As you accumulate surplus from previous months, you will start to create your buffer so you’re not living paycheque to paycheque.
In an ideal world, you want to get to the point where you start each month with at least your total month’s budget amount already available in cash. This way, if you have a month or two where you are making less than your monthly budget you are covered.
With a variable income, you are bound to have some months with surplus and some months with deficit. The strategy is to plan for these instances to balance each other out. Your buffer is not the same as your savings. Your savings should be money directed somewhere else that you don't touch. Your buffer is actively in flux month to month working for you.
The more buffer you accumulate in terms of months' surplus (one month's surplus, two month's surplus, etc) means the more flexibility you have - to accept a smaller contract, to take that 2-week training program, to schedule time off to write, or to take that (planned) vacation.
Scroll to the bottom of this page for a downloadable Freelance Planning Budget.
Some great apps/tools for tracking your budget include:
- The Government of Canada Budget Planner helps you create a customized budget in 3 simple steps
- The Google Sheets Budget Template is manual and fairly limited, but it can be a great way for budgeting beginners to start tracking what you’re spending and what you’re bringing in. The Google Sheets template gives you two pages; one page to track transactions and another to track your expenses, income, and savings. Once you get your feet wet with a tool like this one, you can go on to more in-depth tools to really get a grip on your finances. Access this template by logging into your gmail account, and heading to the Google Sheets landing page. Google sheets is free to use.
- With some experience, you can customize budgeting templates (or build your own!) to suit your needs using Microsoft Excel or Google Sheets. Microsoft Office requires a license to use. Google sheets is free!
- Mint.com is a one-stop hub for your finances, your credit card, bank account balances, investment performance, credit score, and even home value. They make it easy to sync with the banks you already use, and automate categorizing your spending. The app will create a budget for you, letting you know how much you spend in a given category a month based on your own activity, past spending patterns, and average spending in that category. Mint is free to use.
- YouNeedABudget is a personal finance app that uses zero-based budgeting - meaning at any given time you’re only working with the money that you actually have (not the money you’re expecting to come in in a day or a week). Using YNAB, you set up a monthly budget for various expenses, link up your bank accounts to the app, which then alerts you to what you spent money on yesterday. Then, you assign those different expenditures into your pre-established buckets so you can quickly see how much you are spending in each category and can adjust your behaviour as needed. YNAB costs either $12 per month or $84 annually.
- PocketGuard is a budgeting app that (similarly to Mint and YNAB) links your bank accounts, credit cards, and any investments to see all of your finances in one place. You can also set financial goals and track your progress along the way. PocketGuard will even suggest ways for you to increase your saving.
- Wave Financial
If you need more robust accounting software, or are managing finances for a collective using your own bank account, try:
- Airtable's Small Business Budget Template will help you keep track of budget, income, expenses, and salaries. Airtable is free to use and not as intimidating as some more robust budgeting tools. This template also requires a lot of manual inputting of information to set up. The biggest benefit to using Airtable is that you can do so much with Airtable - it is really great for connecting and cross-populating different information easily. This makes it really easy to set up one central spot to keep track of your finances, manage projects, and stay in touch with donors. Airtable is free, with paid plans for more advanced features.
Sometimes it can be hard to tell when to say no to a project. In addition to using the budget planning tool above to see whether the fee covers your expenses, here are a few other resources that can help:
- Freelancers often assume financial risks without the benefits of being a traditional employee. The Urban Worker Project has created a Wage Calculator which coverts your full-time, annual salary as an employee into an estimated freelance hourly rate. It also will factor in invisible expenses like office space, time off, and benefits.
- Jessica Hische created an invaluable Client Email Helper that generates email responses to help you say “no” to free and low-budget work and to help ask for more favorable contract terms before the start of a project.
There are many resources available for Personal Finances & Planning, but it is worthwhile to look at resources created specifically for artists and/or creative freelancers. There are many specific financial questions and answers that are specific to us.
AFC - The AFC supports artists working in the entertainment industry by providing Emergency Financial Aid, Financial Wellness Program, Personal Support and Advocacy and Resources and Support Services. Sign up for their phenomenal Financial Wellness Program E-Zine Newsletter here!
From Rags to Reasonable is a blog and website written by an opera singer who is also a financial planner! The website contains a whole page of free worksheets, tools, reviews, and other resources. He also provides financial coaching for artists.
Artbooks - A highly recommended tax filing service based in Toronto dedicated to working with artists with over 20 years experience.
Toggl is a time-tracking app which is highly recommended by Generator staff - you can track multiple jobs and view your hours my different time periods. It even creates reports!
HoursTracker - Do you work one or more part-time jobs with fluctuating hours and differing incomes? This mobile app will track hours, pay periods and expected income for up to 4 jobs.
Smart Money - Financial management strategies & services for creative professionals.
The First Nations Financial Fitness Handbook contains information, tools, and resources to help you make informed decisions about your relationship with money.
Good Investing provides 1-on-1 coaching to support DIY investors. They charge an hourly rate on a sliding scale based on how much money you're investing, and provide a 15% discount for people who work or volunteer for a non-profit or social enterprise.
GYST (Get Your Sh*t Together) has a bunch of downloadable forms, checklists, and worksheets to get you organized on topics from Goals & Life Planning to Funding & Finance. They also have an extensive list of contract templates, primarly for visual artists.
McGill Personal Finance Essentials is a six-module online Financial Literacy course offered by McGill University. It's available for free for all Canadians! You can go at your own pace, and you'll get tested on each module before progressing to the next.
In the video above, Chris Enns, Canadian tenor and creator of the personal finance blog Rags to Reasonable, offers 5 quick tips for artists who want to take control of their finances.