Secrets to surviving on an artist's income
By Aviya Kushner • Bankrate.com

A life built around playing guitar, painting landscapes or making movies has plenty of advantages. You get to do what you love, and sometimes you even get applause.

What you usually don't get is a steady income.

The same tradeoff is familiar to real-estate agents, antique dealers and anyone else who's ventured into a profession that offers big dreams, large expenses, few guarantees and plenty of dry spells.

"A short film costs about one thousand dollars a minute," says Chiedu Egbuniwe, a 30-year-old filmmaker in Brooklyn, N.Y., whose second short, "The Boyfriend," has been shown at 20 festivals this year.

"At the beginning, you need to pay for that yourself, so you need to save."

It's not just film that's pricey.

"I have several clients who are opera singers," says Susan Kennedy, a certified public accountant in Houston, who is affiliated with Texas Accountants and Lawyers for the Arts. "Opera clothes are ridiculously expensive, but they're necessary for auditions."

She has about 50 clients who are individual artists, and also advises prominent arts organizations on their taxes.

Even when artists get a windfall, such as a big sale, they often don't know what to do with it, financial planners who work with artists say.

Josh Silverman, a financial representative in Boston for Northwestern Mutual Financial Network who spent several years as an art dealer, says his artist clients have different financial priorities than his lawyer and venture-capitalist clients. But, he says, artists still need a plan.

"I'll talk to artists who don't like that they can't depend on art, and my answer is to get a supplemental job and minimize the pain of that. It's great if an artist can make a living off painting or sculpture. But if you can't, I think you need to take a hard look at how to do that.

"If people want to make art as a career, they need to treat it as a business," he says. "You need to be very honest about how it's going."

Silverman says when he worked for art galleries he hated seeing artists make serious financial decisions with no guidance.

"An artist might get a $30,000 check from a gallery show, and no one would help with the finances. No one at the gallery would say, 'You need to take some money out for taxes,' for example. And no one would help him plan."

That's part of what motivates Silverman to work with artists as clients.

"I understand the impulse to buy 1,000 tubes of paint, but that might not be the smartest move at the time," he says.

1. Have a personal financial plan.
When Silverman gets a new client with an irregular income, he makes the same suggestions he makes for every client -- with a twist.

"I stress the fundamentals: risk management, protecting your ability to earn an income and figuring out your goals."

He also encourages his clients to dream. He might suggest saving for their own studio or using the proceeds from a super-successful gallery show to buy a studio outright.

"This way you don't ever have to think about where you're going to paint," he says. "So often the transient thing happens to artists. A place to work is key to doing great work."

For people with children, he strongly suggests life insurance. Disability insurance is difficult to obtain for sculptors, musicians and others who work with their hands, he says, but it's a must and he tries to steer his clients to planners who can help them improve their chances of qualifying.

In almost every case, "I recommend that people come up with a real game plan, a written plan, and stick to it."

2. Be frugal.
"Being an artist and always feeling that pressure has made me notice how expensive even the cheap stores are," says Kate Ledogar, a painter who shows in Boston galleries and also paints portraits on a commission basis.

She says she gets great deals buying used clothes.

Egbuniwe suggests that anyone who wants to stick it out in a field like film spend a month writing down everything you spend.

"The little things -- magazines, gourmet coffee, really add up. You can buy a coffee maker at home and just make it yourself."

Silverman preaches saving money and living below your means while pursuing an unconventional path.

That resonates with Ledogar.

"One thing I've thought about in wanting to be an artist is that I'd better set myself up financially to do this," says Ledogar, who until recently directed the Brookline Center for the Arts in Brookline, Mass.

"So I saved money from summer jobs, starting when I was really young. I saved in college when I bused tables, and I put everything in my bank account. I tried to create a little bundle.

"But I'm still thinking about how I can make the small bundle of money that I saved continue to work for me as I continue as an artist."

3. Keep housing costs down.
Michael Phillips, a real estate agent in New York, says that living in a cheaper apartment can make a big difference, especially in a market where housing is as expensive as Manhattan.

"We live below what we can afford in terms of rent," he says.

This way, if a commission doesn't come through when it should, at least the rent is paid.

"It's very difficult to know when you're going to be paid, and it's very easy to live with an excessive dependence on credit," Sullivan says. "Low rent works as a buffer."

Egbuniwe, the filmmaker, says, "If you think you're going to be an artist and live like some wealthy person in Manhattan, that's not realistic."

Living in Brooklyn instead of Manhattan saves him $350 a month.

"I thought I should create a situation for myself where it would be an easy way for me to control my costs," Ledogar says. "So I thought of buying a condominium.

"Now I have some rental income because it's two bedrooms, and I can rent the whole thing if I want to travel. For the moment, it's worth a lot more than I paid for it, and it's been a good purchase."

Although renters can claim tax deductions for a home office, going for the home-mortgage deduction and the predictability of homeownership and a steady monthly housing payment is something some people on variable incomes suggest.

"The whole rental situation is so unstable, and landlords can just raise the rent. I can't be run out, money-wise or otherwise," says Ledogar, who recommends reading up on low-doc or no-doc mortgage loans.

4. Be tax-savvy.
Artists and self-employed types tend to be afraid of the IRS, says Kennedy, but she encourages her clients to deal with their taxes sooner rather than later.

"I get calls from people who haven't filed in five years," she says.

The smartest tax planning, according to Kennedy, involves thinking ahead. "You need to try and save for taxes as you're earning, especially for people with fluctuating incomes."

She tells her clients to "put something aside; 25 percent is what I generally suggest. Most of the time it will cover taxes plus something for retirement. Even if you put aside 10 percent of your check amounts, that's good too."

Kennedy also prods clients to save every receipt to qualify for as many deductions as possible. A photographer, for example, while out driving might see something that would make a good stock photo, and his gas and tolls might then be deductible. The same is true for a real-estate agent who scouts out homes.

"Try to do it as you're spending the money. That's the trick," says Kennedy. "Discipline yourself, and for that, the shoe-box method works."

The shoe-box method is basically throwing your receipts into a box.

"You'll be happier for it, and later, you can try some of the really great software -- Quicken and MacMoney, for example, " Kennedy says.

You might really need that shoe box full of deductions in April, she says.

"The biggest thing that kills artists is the self-employment tax," she says. "Many artists aren't prepared. They may owe no income tax but they do owe self-employment tax."

But artists also miss out on some of the pleasures of the tax system. "Some people are afraid to take all the deductions" that are coming to them, she says.

Recording-studio space, travel costs and meals are all legitimate deductions that should be used. A home office is also a major tax break, but it has to be set up properly and used exclusively for business.

For artists and people who really need the savings from smart tax strategies, it's doubly important to keep good records and note anything you spend that might be remotely related, just in case.

Once, Kennedy accompanied a rock-singer client to an IRS audit. "He had it arranged month by month, and the IRS was so impressed," she says. "He was organized, he was prepared, and all his expenses were all there. They really wanted to help him."

-- Posted: Aug. 20, 2002