4.12.2014

Making Hay While The Sun Shines (The missing post...).


I thought I would go radically off our usual subject matter and make a blog for the segment of photographers and videographers who are just starting out. Maybe you just graduated from college or maybe you're a little older and you've finally decided to quit your mind numbing corporate job and launch that creative career about which you've always dreamed.

I'd like to make a little suggestion: Save money. Save money all the time. Invest the money in something other than your photography and your really cool selection/collection of gear. Invest every time you get your hands on a check from a client. And do it for the long term.

Having a great year? Save the money. Having a crappy year?  Save the money. There's nothing worse than spending every cent you make in the glory years only to end up with squat when you hit your late 50's and the pool of people who think you are gifted, talented and of the moment shrinks down to a puddle. It's nice to have a bit of cash stashed away so you aren't 100% dependent on Social Security. When you freelance there is no governmental entity standing behind you quietly creating retirement accounts for you. It's all up to you.

But Kirk! What does this all mean? You prattle on incessantly about this camera and that camera and this lens and that lens and we've come to believe that you spend every cent that comes your way on an endless flow of gear.... Where is your moral high ground to stand here and write that we young, incredibly talented, creative people should listen to you preach about saving money?

All true. If you know me only through the blog you probably have concluded that I've never met a camera I don't like and that my family is subsisting on a mean gruel of beans, rice and government surplus grains (which actually sounds kind of healthy). But the reality is that we've learned (mostly the hard way) to save, save, save. Or even better; to invest wisely.

My secret weapon in this whole freelance game has always been my spouse who is good at scrapping the good money right off the top of every client payment. She's the one who sets up Roth IRA's and SEP retirement accounts and 529 college funds and rainy day accounts and all the rest. She smiles and listens to me rationalize just how much my "investment" in, say, a BMW M5 will return to our bottom line (as a flashy company car) as she takes whatever windfall cash put me in the acquisition mode/mood and shoves it into yet another long term (spousal talk for "untouchable") account and reminds me of just how much I like my Honda.

When kids hit college age many people are frankly shocked at two things: How quickly this whole thing sneaks up on you and how expensive everything having to do with college has become. Left up to me I would have tried to save up for the kid's college experience in one or two years as reality hit and panic backed it up. Left to my horrifying skills in delayed gratification my child would have looked forward to two years of community college and a hearty handshake.

Private colleges are now cresting the $60,000 per year mark and that effectively shuts down any sort of fast track savings plan for any of us in the middle of the middle class. But.....if you start saving for your child's college education every month from the day your child is born you'll at least have a fighting chance of making it all work out. My kiddo has spent the last part of this week up at a college in New York, checking out the whole lay of the enterprise. A text an hour ago tells me that he likes it. He's been accepted but he hasn't committed yet. Because my kid takes after his mom and not me he's made really good grades at a really competitive high school so nearly every college that's accepted him has offered to help financially with merit scholarships. Between what he's earned academically and what we've saved we can just make the spread and give him the kind of opportunity of which we've always dreamed.

But we would never have felt confident doing that if we had not also saved every single month of every single year that I've been a freelance photographer in SEP and IRA accounts. What it all comes down to is having one partner in every relationship be smart enough to make hard choices and to enforce them. To choose the retirement account over cable television. (an after tax savings of up to $300 per month if you figure that you are paying for your cable service with after tax dollars and then factor in the deduction you could have taken and the monthly opportunity costs...). That's $3600 a year and, with interest or dividends, at least another $100,000 over twenty years. Maybe more.

The same goes for choosing to buy new cars only when they've given up a proud ten years or more of service. Those cars under consideration? The cheaper the better. The lower operating and insuring costs the better. If you have to have the biggest and the best of everything you're probably not cut out for the freelance life style.

It's a way of thinking that filters into everything. We only vacation to locations where one of us has been hired to do a job or project. We eat out sparingly. We upgrade computers only when it makes financial sense in terms of time expended on projects. No shiny new stuff for us until we start squirming at the deadlines.

Look. The bottom line is that this is not a secure business. It never has been. It's one thing to make it in your twenties and thirties, surviving on a shoestring and sleeping on a girlfriend's couch, and a totally different thing to make it in your 40's and 50's. You'll sleep better if you've got five or ten or fifteen years of life expenses in your accounts and even some more tied up in your home's equity. Anything less is anxiety inflicting.

My advice to all budding creatives? No new toys until you've made your monthly financial contribution to your own future. And even then you should have a solid enough rationalization for buying the gear to get the expense past both your spouse and your CPA....now that's really creative.

5 comments:

Leigh Miller said...

Perfect.

Craig Yuill said...

This is great advice for everyone, not just budding creative professionals. My father, a retired accountant, told me several times that a mistake many business owners make is to spend large amounts of money on unnecessary items designed to make them look/feel successful. Your comment about the BMW comes to mind.

On a personal level, in recent years I have had to seriously question my own spending habits, to the point where the desire to acquire gear has been substantially reduced. I have come to the conclusion that what I have right now is pretty much all I need to get the photographs I want. In fact, yesterday I took quite a few photographs of cherry blossoms using a couple of pieces of equipment I probably don't use often enough - an "old" 90mm macro lens, and a sturdy tripod. I can see how a similar mindset would help the bottom line in a business.

As for investing wisely - I attended a seminar on financial mathematics a few months ago. The person conducting the seminar showed how a person can set aside $100/month from age 15 to 25 and then stop investing altogether and end up with more money at age 65 than if $100/month was invested from age 25 to 65. It all has to do with how compounded interest works. Ten years of investment done early can yield better results than forty years of investment done later. Imagine that.

Yoram Nevo said...

You American are crazy. Why doesn't the state finance, or at least help to finance higher education. It will pay back triple the cost. Here in Israel university costs about 4000$ a year. And in Europe it's free.

Brian Hemmis said...

If you haven't already, read "The Millionaire Next Door"-my bible...

Jim Tardio said...

I knew there was a good reason why I'm still diving my 1997 Chevy pick up truck.