Gallerella

Shake Your Money Maker

Ignore the crassness of the title of this blog for a second and stay open for just a bit. I work with a lot of artists. I help them manage their finances and often times I’m helping them deal with the lack of funds and the unpredictability of cash flow. I work with artists at varying stages of their careers and varying degrees of success. But most of them have one thing in common: they reject that which is easy or that which has been freely given to them. They believe by embracing that thing that they are selling out.   

In the art world negative connotations have always revolved around the idea of compromise aka selling out or giving in. But why is that? When I look at my young daughter and see her making compromises with other kids on the playground, I see it as a good thing, a sign of maturity, a sign of putting others’ needs before her own but still managing to get a little bit of what she wants too. Two happy people are better than one.

So why in the art world is it bad to compromise? Why are making concessions considered negative? One artist told me it’s because we associate compromise with handing over our unique, singular vision. Okay that may be true, but maybe this way of thinking is preventing artists from seeing an opportunity buried in those confines and limitations.

Let’s take for example an artist named April. She wants to have a gallery but has decided she can’t wait around. She does sales out of her studio, but it’s not nearly enough to pay the rent and cover her cost of materials. She has had a long-time connection with a major sports fashion brand and is often hired as an art director on photo shoots and asked to consult on product design. These side projects help her sustain her art practice, but she dislikes being subjected to budget constraints and marketability oversight.

We’ve been working together for the last few years and my biggest advice to her has been: embrace your connections, embrace this relationship, and embrace the limits. As an artist so often you are working with nothing to ram up against and that can be exhausting. These opportunities present a way to practice your art in a different environment and structure. Limitations can lead to growth, problem solving can lead to development, parameters can set you free. This opportunity may be her ticket to getting her work the exposure she desires to an even larger audience than those that just read Artforum.

Another artist I work with is Brian. He had a day job working at a billboard company. He was doing graphic design work and not the glamorous kind. He was hired to do grueling and labor intensive Photoshop retouching work. Seemingly meaningless and backbreaking work, but it paid the rent. He toiled for a good year there and eventually made friends with the owners. He finally approached them to sponsor an art project. He saw an opportunity; he embraced his relationships and leveraged it to mount a large billboard project all over the city of his work. This is the kind of exposure he would never have gotten by exhibiting his work in a gallery alone.

I do believe that opportunities and relationships are not random. I think that the universe answers us in ways we cannot really comprehend at the time they present themselves. But if we stay open, embrace things that come our way and figure out a creative way to incorporate and leverage those things, the results can be startling. My advice in this blog is: stay open. Stay alert to the opportunities that you may have dismissed. Look around you and see if you have neglected someone or something that might be offering a new and interesting challenge. It might be right behind you.

The Buddy System

The Buddy System

I’ve been thinking about this idea that everyone has something to teach. You may not agree with their occupation, their religion, their lifestyle or their use of money, BUT there may be some sliver of an opportunity to learn something valuable from your most reviled enemy. Let’s take for instance an investment banker.

What is the utter opposite of an artist? To me it’s an investment banker. Investment bankers’ entire goal is to make money. Not to make or create some THING or anything for that matter. Just money. And an investment banker might argue “but that’s what makes the world go round. What else is there, really?”

This statement might repulse an artist. And we may loathe their kind but they do have something to teach. I would bet that most investment bankers don’t have debt and they probably have sizeable savings accounts so maybe there is something I (and a few artists) can learn from them.

What a revolutionary idea: an exchange program where investment bankers give free financial advice to artists in exchange for an artwork. I’ll work on that Buddy System idea and get back to you.

In the meantime I’ve been interviewing various financially savvy friends of mine. I asked each of them: How did you learn how to save? When did it start? How were you able to do it? What should I do? How should I advise artists? And the resounding answer was “trick yourself”. The only way to save if it’s not in your blood is to force yourself indirectly. You never see it. It’s like it never happened.

I started thinking about my saving and spending habits over the years. There was a time when I made $25,000 a year, $35,000 a year, $50,000 a year and every year I spent it. So when I had $25,000, I lived on $25,000, and when I had $50,000, I lived on $50,000. SO I need to trick myself into thinking I only have a certain amount and that’s what I will ultimately have to live off.

Okay. How? I’m not an employee. I can’t have someone else take out the money for me and put into an account that I never see or that isn’t connected to my checking account. How does an artist or someone who is freelancer pull this off?

I was looking at my bank’s website for different services and then it hit me: BILL PAY! Okay, so I can set up an account, Capital One 360, Fidelity or Schwab or whatever money market account I can find, and then I can set up an auto debit out of my account every 2 weeks or once a month. It’s just like a bill that I have to pay except it’s a bill that I pay myself. And I can’t access it that easily meaning that if I want to buy something major on the spot, I can’t. It takes 3 days to get the money to transfer into my checking, think of it as a “cooling off” period.

I think this might actually be the golden ticket. Thank you, to my financially savvy friends who contributed their sage advice. I will probably call on you again when I set up the Buddy System!

Savings and Sci-Fi

Back on the wagon. Back to the topic of finances or lack there of.

I listened to an interesting Ted Talk while enduring traffic driving past downtown LA. Check out Keith Chen: Could your language affect your ability to save money? <http://www.ted.com/talks/keith_chen_could_your_language_affect_your_ability_to_save_money.html>

According to Chen I’m not to blame for my lack of savings. The problem isn’t my will power, the problem is that I think of the present and the future as different and I constantly reinforce that way of thinking every time I express the present and future through my language.

I love these types of thought experiments. So if the theory holds then when I say “it’s raining” to talk about rain right now and then I say “it’s going to rain” to talk about rain in the future, the mere different treatment of these two things linguistically means that I “think” about the present and future as different.

Chen through exhaustive comparative research took into account all factors and many different cultures and came to the conclusion that cultures that did not differentiate between present and future saved! They look at the present and future as the same so it’s not hard to sacrifice a little now for a larger benefit in the future. If the present and the future are thought of as the same and it’s reinforced in their language then it is easy to choose $10 today or $15 a few months from now. So the choice is easy $15! Those are the people that save.

I do value the present and the future differently, and I do put more weight into the present. I do like to realize the benefit now versus later. But I also love the future too hence my addiction to sci-fi. So I’m wondering if my love of sci-fi will help counter balance my desire to have things right now. Maybe if when I’m confronted with the desires of the present, if I can picture a future that’s more fantastic, I might be able to dissuade myself in the heat of the moment. It’s worth a shot.  

Artists & Taxes Redux

Here’s an updated blog post from last February.

Let me preface this by saying I am not a CPA (Certified Public Accountant / aka Tax Guru) and am only giving mere suggestions here in this blog. Please seek tax advice from your accountant. 

So you’re an artist and you have expenses, you probably file a Schedule C for your art practice where you deduct studio rent, studio utilities, health insurance, supplies, production expenses, pedestals, framing, contract labor (make sure you file 1099s), shipping, crating, photography documentation, software, archiving expenses like flat files, etc. 

Here are some other areas to also consider (and ask your accountant about):

Continuing Education – museum talks, classes, conferences

Dues & Subscriptions – art magazine subscriptions, museum memberships

Research - music, video rentals, movies, books, museum entry fees, tickets to special events (ask yourself if they play a role in your own art-making)

Marketing – website design, business cards

Catalogues

Work clothes like coveralls

Lunch for studio workers

Parking while on business errands

Interest expense on your business credit cards

Bank fees for your business checking

Unfortunately fancy clothes for your opening not deductible

IRS Circular 230 Disclosure: Any written tax advice contained herein was not written or intended to be used and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

A B C’s of Business Entities

I’m taking a little break from the financial experiment for the next few weeks of blogging to address a few things that I’ve seen come up recently. My dad asked me to give him a quick breakdown of the different business entities, and I realized that I get asked this question a lot. This is just meant to be an introduction, and I highly suggest that before you set any of these up that you consult a CPA and a lawyer. There are also a bunch of online companies like Legal Zoom and The Company Corp that can help you set these up more affordably than a lawyer, but you don’t get the same level of support and counseling.

Sole Proprietorship

Sole-Proprietor means one business owner. This is the default mode of operating a business. You and the business are synonymous so if the business makes a profit then you make a profit and if the business incurs a debt you also incur that debt. Legally there is no separation between the business and you. So if the business gets sued because one of your assistants gets seriously injured while building a frame for you, you get sued personally as well. But this is by far the simplest and least expensive way to operate a business.

Partnership

Artists that are often working as collaborators might want to form a partnership. The main difference between a partnership and a sole-proprietorship is that the partnership files its own income tax return. But whatever income or loss occurs, it flows through to the partners. So the partnership isn’t paying tax directly. The income or loss passes to the partners to report it on their personal returns. The main advantage of a partnership is that it allows for that flow through income or loss to be customized. For instance, the partnership might be 50/50, but the partners choose to split the profit 60/40 if that yields a better tax result. The downside of partnerships is that one partner is personally liable for whatever the other partner does. So that’s why partners often form an LLP Limited Liability Partnership, which offers some liability protection similar to an LLC (see below). Partnerships can be tricky so make sure a lawyer draws up the agreement and that it specifies who does what and what happens when a partner wants out.

Corporation

The main advantage of setting up a corporation is to raise money and to protect yourself. A corporation exists, as a separate entity so there is a barrier between your personal assets and the business. So if the company gets sued, in most situations, they can’t come after your personal bank account. There are C corps and S corps, and they are treated differently for tax purposes. A C corp can have as many investors as you want. It also files its own tax return and pays taxes on its profits. So it’s not a flow through entity. The downside of C corporations is double taxation. When a business makes money it pays corporate tax. Then because you are an employee of your company, you are paid a salary and you are taxed on that at an individual level. But with the S corp there is no corporate level tax because it’s treated like a flow through entity. The only downside to S corps is that you can’t customize the income flow allocation. So if two people are 50/50 investors in an S corp then they have to split the profits 50/50.

LLC Limited Liability Company

The LLC is a type of entity that is typically considered the best of all worlds. It limits your liability, it’s a flow through entity so you are only taxed once, and you can allocate how the flow through occurs. So a lot of artists choose to set up a single-member LLC. But depending on where you establish your LLC you will be charged an amount by the state to maintain the LLC status. In California it’s $800 each year so it is definitely something you want to carefully think about especially if you aren’t making a lot of money from your practice.

Because all of these entities cost money and take time to set up and maintain, I don’t advise people to set these up lightly. I would only recommend it if there was a real need, for example the need for liability protection when you hire people to work in your studio, if you need to raise money, if you have collaborators, or if there is a special project that you want to isolate from the rest of your practice.

Next blog post I’ll revisit some tax tips for artists.

Attack the Debt Part 2: My Austerity Measures

So let’s fast forward a year ahead, and I’ve got all my credit card debt paid off, and I’m celebrating and feeling great about what I’ve accomplished. I’m free and light and really proud. I should reward myself. Then it dawns on me; I’ve felt this way before. I’ve actually felt this way several times in the course of my life. I mean I’ve paid off my debt many times over before, yet I end up back in it a few years /months later. What’s to prevent this from happening again? I remember feeling really free and light and proud but somehow the immediate need for things was greater. Ultimately the problem with my money is me.

So how do I fix me?

I remember telling myself all the typical thing that all addicts tell themselves:

This is the last time.

I will pay it back.

I deserve it.

I’m fully aware of my choices.

I’m not addicted.

I am addicted, but I don’t care.

So what makes all of this effort worth anything? The only thing that makes it worth it is to never ever be in debt again. Okay, so I’m committed to being a recovered debtor. How can I do things differently?

Stash or cut up the cards – okay I still have them in my wallet, but they have sticky notes on each of them with strange reminders like You’re Fat.

No unnecessary shopping – so un-American, does buying sundries at cute, new fangled general stores count?

Live within your means – not so hard if I’m not shopping for unnecessary things

Use up what you have  - okay gone thru closets and pantries and have actually whipped out my sewing kit and mended clothes that would normally go unworn and taken stock of things that I forgot I had

DYI – okay maybe this is going to be a complete disaster but I’ve almost got my husband convinced that we can paint our house ourselves, saving ourselves a whopping $8,000! I will let you know how this turns out…

Do research – I hate doing research but luckily I’ve partnered with a man who is obsessed with Consumer Reports

Buy it on sale – I really loathe coupons but I love a sample sale. I will have to work on this one. I do like that Penny Saver that I get in the junk mail. Very interesting things for sale, but then I remember No unnecessary shopping so it goes into the recycle bin.

Substitute not deprive – I’ve been thinking about doing one weekend a month where I try not to spend a dime. How do I go to the Getty without spending money on parking? I will get back to you on that.

Have a mantra handy – when I’m tempted to spend money on something that I don’t really need, here is what I say, “I’m already happy with what I have”. It’s worked so far…3 days in. I will let you know how it goes this week.

Don’t hide, don’t lie – I have to admit I did buy something this week but it falls into the Buy it on sale category, and I did actually need black ankle boots because I don’t currently own a pair. And I’ve already worn them since I bought them. And I didn’t buy them with a credit card. Clearly the mantra didn’t work on this because I did need them. But at least I admitted it.

I leave you with a quote that helped me avoid some major purchasing mishaps at the Issey Miyake pop up store this weekend.

He who hesitates saves money. 

Attack the Debt - Part 1

I recently read an interesting yet obvious fact: all millionaires have one thing in common; they all live within their means. Of course they do. And you’re thinking, well sure it’s easy to live within your means when you’re a millionaire. But the obvious point is that they didn’t get to be millionaires without living within their means. Since college, I have not lived within my means. I’ve had times when I made $20,000 a year and lived as though I made $25,000. I’ve had times when I made $50,000 and lived as though I made $75,000. But I’ve never made $75,000 and lived as though I made $50,000. It’s a slow creep in your standard of living. It happens very gradually and so discreetly as to go almost unnoticed.

Until one day you realize, I really can’t remember a time when I didn’t have some amount of debt. I’ve always had school loans, but I never really worried about it. I’ve had on average about three different credit cards at once that have carried balances ranging from $1,000 - $12,000. I honestly tried my best to handle my debt responsibly. I would auto-debit the minimum amounts so that I wouldn’t incur late fees or unnecessary interest rate hikes. I kept an eye on my interest rate and balanced transferred to a no interest or low interest rate card when needed. I felt that I was managing my debt pretty well.

But let’s face facts: debt is both financially stupid and emotionally burdensome. If I didn’t have credit card debt, how much could I be saving for a vacation to Costa Rica? Or how much could I be using to build my business, save for my kids college fund or save for my own retirement? Or better yet, how much could I have so that I could make a real choice about what I do with my time and how I make a living?

So please make this commitment with me right here and now to get rid of credit card debt as fast as humanly possible. Pull out all of your credit cards. Grab a piece of paper or create a spreadsheet. List all the credit cards. Go online and look up each balance, minimum payment due, due date and interest rate. Rank the list by highest interest rate. Take all the credit cards except for the one with the lowest rate and put them in a drawer in an envelope and mark the envelope “Danger” or “Don’t be stupid” or “Get a grip”, whatever works. If you are not good at self-control, I suggest you cut up all but one card for emergencies. Do not close credit card accounts because it reflects negatively on your credit rating.

Make sure all credit cards are set up to auto-debit the minimum payment each month from your bank account. All accounts like Netflix, Amazon, iTunes link those with your debit card instead of your credit card. Look if you’re one of those people that pays off your balance every month and you like to get the miles, just ignore this blog post, but if you’re like me and you want to get out of credit card debt ASAP then just suck it up and use the debit card until your debt is paid off. I’ll blog later once I’m out of debt about cool ways to take advantage of credit cards.

Okay here is the thing you cannot ignore: you have to pay more than the minimum payment each month. If you don’t, it will take you 30 years to pay off your debt. If you don’t believe me look at the front of one of your credit card statements. Credit card companies are now obligated to tell you the cold hard facts that if you pay only the minimum payment you’re totally screwed. So figure out what you can afford to put towards your debt every month. I estimated I could forgo a latte every morning and make coffee at home and save $106.50 per month so that’s what I am putting towards my cards above the minimum payment.

So I have 3 credit cards:

A: $4,500 at 14.25% interest rate, min payment $80

B: $11,250 at 7.5% interest rate, min payment $205

C: $8,500 at 0% interest rate, min payment $150

All are set to auto debit my bank account before the due dates. Next I take $10 above my minimum payment and put that towards each card.

A: gets $90

B: gets $215

C: gets $160

My worst card is A so that needs get paid off first so I distribute the balance that I am going to put towards my debt to card A. ($106.50 - $30 ($10 to each card) = 76.50)

A: gets $90 plus $76.50 = $166.50

Once A is paid off then I move to card B and do the same thing.

Getting out of debt is a tremendous milestone. I personally will be celebrating in Vegas once all of my cards are paid off. Just kidding.

So the next question is how to stay free and clear of debt once you’re out. Let’s just worry about getting out first and the next post will be dedicated to techniques of staying out of it.

I will leave you with the best quote about debt that I’ve found so far:

“Don’t let your mouth write no check that your tail can’t cash.”
-Bo Diddley

Occam’s Razor

I felt really awful after I wrote the last blog post. I couldn’t really put my finger on it. Maybe it was because the post was so boring and dull and really obvious. How was I really helping anyone by stating the obvious? I think what bummed me out was that there was no creativity to it. I believe that every step of this process deserves more than what’s expected. A practitioner of Jungian psychology once told me when something feels really icky go to that icky place. Don’t try to talk yourself out of it. Don’t try to run. Don’t try to avoid it. Just go to the icky spot, settle in and hang out there for a while. So that’s what I did. And then I fell asleep.

I woke up the next morning thinking about Jodie Foster. I had fallen asleep reading Twitter feeds about Jodie Foster at the Golden Globes. And I’m thinking Jodie Foster, best movie she ever did besides “Silence of the Lambs” was “Contact”. (Don’t judge, remember I’m a sci-fi freak). And then I’m thinking “Contact”. I love that scene when Jodie Foster talks about Occam’s razor. Occam’s razor states that the simpler explanations are, all things being equal, generally better than more complex ones. Okay, so maybe writing about the obvious wasn’t as bad as I had thought. So as obvious as it is, the last blog post is still valid and potentially revolutionary, well maybe not revolutionary but at least mandatory. Going thru the past and uncovering the way you spend money is boring and labor intensive but it’s absolutely necessary in order to move forward.

So why did I still have the gnawing feeling in my gut? Maybe it was because after looking at my own reality, after examining my own finances, I felt really…poor. I’m not that type of thinker. I’ve always thought of myself as lucky. I’ve always considered myself wealthy, you know, other than material wealth. But I cannot deny what I look like on paper. So when I feel really low I turn to my Eastern philosophy for some answers. How can I make myself feel less poor? How can I get rid of this gnawing sensation? I turned to a few books actually and they all said the same thing: give money. What? That doesn’t make any sense. But as I read on, I was becoming more convinced.

If you eat alone, you won’t eat happily – Buddha

Okay. So this is one of those answers that is NOT obvious. Give to charity, and when you give, give freely and spontaneously. Yes! I get to be spontaneous again. I immediately went online, found a charity that I cared about and gave a monthly donation of $10.

So throughout this whole process, the moment you feel poor, the second you feel less than abundant: give something. Not only does it uplift your spirits, but it truly makes you feel full of wealth and complete gratitude.

Resistance is Futile

Step 1: We know we need to change the way we deal with money. Yes.

Step 2: We have a few tools to help with this seemingly insurmountable task. Got it.

Step 3: So now how do we go about planning the attack? What do we do next? I look at this challenge as a giant imposing mountain, and right now we are standing at the bottom of it. Or maybe we are at the first two toeholds but still very far from the top. In fact I almost feel as though it’s more like one of those balancing rocks you see in Sedona. We’re inverted right now. And even though I’ve committed to this challenge and even though I’ve admitted that I have to address this issue of money for myself and for artists that I’d like to help, I’m still overwhelmed by the prospect of taking on my finances. My hands are already bleeding and my knees are already shaking.

The next step in this uphill battle is to take the blinders off and face reality. Take out every bank statement and credit card statement for the last 2 years and come up with an average that is spent on every expense category: groceries, gas, eating out, gym, supplies, bank fees, student loan payments, car payment, travel, entertainment, rent, utilities, etc. My list has more than 30 items. It is more than a can of worms. It’s like sticking my hand in that insect-filled black hole in “Indiana Jones and the Temple of Doom”. I’m kicking and screaming the whole time and crying a little bit too. Why am I doing this? Can’t I just eat out a little less? Can’t I just buy fewer shoes? I have lots of will power so why do I need to go thru the past. This is about the future. I don’t need to sift through all this old paperwork. I don’t have the time to do this. I have more important things to do like make money. I have more important things to do like be with my family. I can skip this step. I can just pretend that I went thru it. And then I had to face it. I had to do it. If I don’t do it, I can’t write about it. What had I gotten myself into?

I spent one week whining about doing this and ultimately it took about 8 hours to go thru the process. Eight hours to download and print 2 bank accounts and 4 credit card statements and sift through each statement and compile the categories in a spreadsheet. Eight hours and you will know more about yourself than you ever thought. So just do it. Don’t do what I did and waste time, just suck it up and do it. I guarantee you will learn something that is fundamental about how you spend money.  I learned that I spend WAY more than I ever thought I did. And surprisingly I make way more money than I ever thought, but less than I need to cover my expenses.

I thought I spent about $300 a week on groceries. No, I spent $365. And you’re thinking well that’s not totally off, and my old self would say, you’re right. But I’m actually off by $3,380 per year. Okay here’s another example, I thought I spent about $400 per month on eating out. Shocker, I spent on average $1,085 on dining every month. I was off by $8,220 for the year. Okay so what, I’m just bad at estimating how much I spend. So how does this help me for the future? Well, I noticed two things by going thru this arduous step: 1. I noticed where I could cut back. I didn’t need to go to the nail salon every week. I didn’t need to shop at Ikea once a month. Half the crap that I bought was sitting under my desk not even out of it’s packaging or built from the last trip I took there so how bad did I need this stuff. I could have the cleaning people come 2 times per month instead of every week. But the 2^nd and more important thing that I learned was that because I was paying off OLD purchases meaning paying a lot in minimum payments on my credit cards (things that I had bought last year) I was spending more than I was making! How is that possible?

This is the scariest step of them all. And this is the most necessary step in order to figure out where you can save. This doesn’t mean that you have to budget yourself and live an austere life with no thrills or spontaneity. But if you’re like me, spontaneity landed you in some debt so maybe it’s okay if we take a break from spontaneity until we have our finances under control. Regardless at least you know where you stand and you can make sound decisions because you know the facts.

What did you learn about the way you spend?