Starving Artist? You Don't Have To Be... And The OMPA Agrees!

Hey there kids - as I was doing some year-end tasks (pulling together mileage records, invoicing producers, seeing where the retirement accounts are - yeah, retirement accounts.  Trish and I are actors - in Portland, OR - and we have money set aside for retirement.  It really can be done, ya know...) it occurred to me that I haven't shared this article I wrote for the December issue of the Oregon Media Production Association's monthly newsletter, The Call Sheet about just this sort of thing.  See, for the past year I've been working with the OMPA's Talent Committee to put on a series of workshops that give film and TV workers resources to live a sustainable life... well, it's all right here in the article:

OMPA’s Talent Committee Takes On The Myth of the “Starving Artist”

By Harold Phillips

Most people working in our industry have been exposed, at some point, to the romantic notion of the “starving artist” – that person who lives in poverty, works three jobs to make ends meet while pursuing his or her creative endeavors on the “off-hours,” and is often hungry (but nourished by those endeavors.) 

It’s a romantic notion, to be sure, and our hat’s off to anyone who can make a life like that work for themselves and their families.  OMPA’s talent committee, however, doesn’t believe our members need to starve to work in this industry.  On the contrary – we believe that our industry is only weakened if those working in it are living “hand-to-mouth.”

Of course, we know first-hand how difficult it is to make a living in film, TV, commercials and new media here in Oregon – the variable work, the sometimes (if not often) low wages, the unpredictable schedule… we also know there are ways to take charge of one’s life and business that will not only help those working in our industry “make a living” – but LIVE a stable life.

Over the past year the Talent Committee has presented a series of seminars aimed at giving OMPA members and others in our industry the resources they need to get their business and personal lives in order.  In February, the Committee held a workshop on tax planning.  In September, we presented a panel discussion on health insurance options.  This coming January, the Talent Committee plans a panel discussion on saving, investment, and retirement.  These seminars, and others the Talent Committee has planned for 2012, are presented free of charge for OMPA members (and are open to the public for a nominal fee.)

As our members toast the end of 2011, we hope they’re also analyzing the challenges and missteps that may have occurred this past year… and that they’re laying plans to make 2012 an even stronger year.  The Talent Committee’s seminar series is there to help with those plans.  We hope you’ll join us in the coming year as we explore ways to make our industry stronger, by keeping those working in the industry from starving.

Back-To-Business: A Question of Balance

The Back-To-Business Series: Index

I introduced you to the "Golden Triangle" in our last "Back-To-Business" article (I would say "last week's article," but as you know... we had a small problem there...) We're going stay focused on managing the resources you - and any business - use to generate profit over the next few weeks, and you'll notice that I'm going to keep coming back to this Golden Triangle as we do so. You see, the Triangle is a tool to remind us of the resources we need to keep track of - and it's a symbol we can use when we think about the way we run our acting business.

There are a couple reasons why the Triangle is... well, a triangle. The most obvious is that there are three basic resources you need to manage in your acting career. A lot of actors get stuck on the money - and it's understandable, since you're trying to make money as an actor without spending too much money in the process (that's how you measure the profit of your business, after all... the amount you've brought in versus the amount you've spent.) Money's just one of the resources you need to to actively manage, though, to have a successful career. Time is just as important, as is your reputation amongst those in "the business" - and amongst your audience.

There's another, more subtle reason for the triangle in the symbol above. I use that shape as a reminder to keep all my resources in balance. As actors, we strive for balance in our daily lives... balance between work and play, between feeding our souls and feeding our bellies, between pursuing work and actually working... it's a long list. Balancing our business resources, however, is just as important as balancing our personal life.

What do I mean? Well, lets think about our personal lives... if we spend too much time working, and not enough time with our families, our personal relationships suffer. If we spend too much money at the bar and and we don't have enough to cover our rent, our finances suffer. Spend too much time at our "survival job" and not enough time acting? Then our hearts suffer. I'm sure you've enountered at least one of these scenarios in your own life... we have to balance the things we need (work, family, friends, fun) to live a happy and fulfilled life. I'm not saying that's an easy thing, mind you... but its something every human strives for.

Businesses strive for the same balance in their "lives" - but they seek to balance the resources they need in order to be successful. HP, for example, needs certain resources to make their products, and to generate a profit. They need raw materials like silicon and plastic and glass... they need workers to assemble their products, sell them, and manage daily operations... they need an image or "brand" to trade on... and of course, they need the money for all these things. If they spend too much on one of these resources (such as personnel), they won't have enough money for another (such as advertising). Similarly, if they run into a shortage of one resources (like raw materials), they'll have to spend more on it... and they won't have enough money to put into other resources. They have to balance the resources they use in order to make their products - and thereby make a profit.

Guess what - your acting business follows the same pattern as your personal life... and HP's business "life" (even if you don't use the same resources they do.) You have to keep your resources balanced to make your product (your performance) and generate a profit. If you devote too much attention to one area (say, money) then another area is going to suffer (the time you could be spending working on your lines - or your reputation in "the business.") And because of the nature of our business, if those areas suffer our personal lives are also going to suffer. Balancing your businesses resources will help you balance your personal life - and will help you stay happy at work and at home!

There's a third reason I use a triangle to help track the resources in our acting business - it's because those resources are interrelated.

As I said above, a lot of actors get stuck on money... but consider - you have to have the time to work in order to get that money. You have to invest your money in building your reputation (headshots and reels aren't free, you know... nor are the drinks at networking events!) If you build a good reputation in your market, directors and producers may start approaching you directly to read for roles (or just hire you outright), thus saving you the time of tracking all over town looking for auditions... but building that reputation takes an investment of time and - in some cases - money!

You see, these resources don't live in a bubble. None of them can be the be-all-and-end-all of your life, or of your business (as I said a couple weeks ago, "business isn't about money!") They all relate to one another, and when you put too much emphasis on one, the others naturally suffer. Keep this idea of balance in mind as we move into a more in-depth look at each resource over the coming weeks.

And for now...

Let's get to work!

-Harold

Back-To-Business: The Right Time To Invest In Your Business - Mailbox

The Back-to-Business Series: Index

Howdy folks

Well, I got a lot of email and more than a few Twitter comments about Monday's post about investing in your acting business... let's dive right in!

... What you said about investing in my career sounds good, but I need that money I make from my theater jobs to pay my rent. I'm not GM or Apple - I can't afford to be spending my hard-earned dollars on fancy software programs. GA (Baton Rouge, LA)

I get what you're saying, GA - believe me, I do! If you're pursuing acting as a profession, rather than a hobby, then you're using the money you get to pay your bills, eat, put gas in your tank... etc. No one's arguing that those needs have to come first.

That being said, to get ahead we have to do more than just subsist on what we earn - we have to use our money wisely, and put some aside for when things are slow... or for those unexpected "emergency" costs... or for investments in our business. This is why I encourage my career coaching clients to set up a separate bank account for their acting businesses - and to hold back whatever they can afford in that account to pay their business-related expenses.

Trust me, I'm not saying holding funds back is an easy thing - like you say, we've all got expenses that need taken care of. With a little forethought, planning and frugality (cutting back on our purchases of things we want instead of things we need, for instance... or making your own coffee instead of buying it, fewer trips to the bar after the show... that kind of thing) actors can save up a little cash to reinvest in their business. It's not necessarily easy - but it's possible.

PerformerTrack calls this little savings fund the Performer Trust account (once again, remember you can save 20% off a 1-year subscription with coupon code PORTLAND9). After a few months of holding 5%, 10%, or 20% of your pay checks back you might be surprised at how much cash you can accumulate to invest in your business!

... Sorry, but it is a job - actors should always be paid as employees, and congress agrees: http://www.abajournal.com/news/article/feds_poised_to_pursue_misclassification_of_workers_as_a_crime/ so you'd better be wondering where that next "job" is coming from. SD (Seattle, WA)

I'm not saying actors should or shouldn't be paid as employees, SD. As I've said in the past, until every actor gets paid for every project as a W-2 employee, it's important for us to know how to operate as both 1099 "independent contractors" and W-2 employees. If you don't want to work as an independent contractor, that's fine - but plenty of other actors are accepting 1099-based contracts.

Whether you're working as an employee or a contractor, though, I'd suggest always treating your career a business. It's a question of focus and perspective - a lot of actors I've known approach their careers with the perspective that they're "working a job," so they put all their focus on doing that job (nothing wrong with that, right?) When that job ends, though (as all acting jobs eventually do), their focus is fully on finding a new boss to give them their next "job."

Businesses don't work this way - they have a range of clients or customers, and they work on cultivating more of them even as they're doing work for their existing clients and customers. Their perspective is that they're selling a product or providing a service to a group of people, and their focus isn't solely on the work they do for one client, but all the work they do for all of them (including those they haven't met yet.) Consequently, when work for one client ends, they don't panic and run around looking for work - they simply shift into work for their next client.

W2 or 1099 aside, mentally it's to an actor's advantage to emulate the way that business.. well, does business. Following that model is what allows us to build a sustainable career... as opposed to waiting for one job to end before we frantically look for the next one.

I don't disagree with what you are advocating, however, there is one major aspect of an acting career that differs from big business. ROI. Return On Investment....The annual income statistics that the unions put out continue to be pitiful. And let's remember that's averaging in all those gazillion dollar salaries of the major stars. It's simply a fact that the ROI of most actors will be a negative number. BC (Studio City, CA)

ROI is important, BC. I don't agree that "the ROI of most actors will be zero" (my emphasis, not his), but it's important to keep ROI in mind when considering investments in your business.

Before we go much further, lets get one thing out of the way - the term "ROI" is more of that "Nightly Business Report" language that a lot of actors' eyes glaze over at. It's a simple enough concept: You spend money (investment.) You want to make at least as much money as you've spent (the return) as a result of that investment. How much money you make (or don't) beyond what you've spent is the return on investment. Of course, most of you readers have probably already figured that out... but I figured it was a good idea to define the term for my "special" cousin Eustace (Auntie-Norma-Jean got him one a' them there computer machines fer his birthday, ya know...)

(Great, now I'm going to get hate mail from all you readers named Norma Jean and Eustace. Sigh... moving on...)

Like I said above, ROI is important. If we're going to lay out money on something, we want to see a positive result from what we spend. If we pay to get new headshots taken and printed, for instance, we want to see more auditions and booked projects (and therefore more income) as a result of that cash outlay. The question is... how do you know whether you've got a positive or negative ROI on what you spent?

This is one of the many reasons why I use PerformerTrack. Unless you're tracking what you've spent and what you've brought in, there's no way to know what the ROI on those headshots was. By entering my income and expenses into PerformerTrack, I can print out an Income Report and an Expense Report, and I can see if I'm making a profit this year or not (if I'm making a profit, I'm getting a positive ROI - everything I've invested in has cost me less than I've brought in, after all...)

If I'm not making a profit, then I have to look at what I've invested in and see what's working or what's not. I might need to spend more money to balance things out (those headshots I paid for? Not working? Ok... I guess I need different ones), or I might need to reduce the amount I spend on memberships... or subscriptions to breakdown services... or...

The point is, we should never assume that we're going to have a negative ROI. We should invest expecting a positive ROI - and then we should pay attention to be sure that our expectations are met. If they're not, then it's time to make a correction of some type or another. Our income level doesn't necessarily factor into this - if we know how much we're making, then we know how much we can spend.

Expecting not to get a positive ROI, though, just becomes a self-fulfilling prophesy. Why invest in something that could make us more successful if it's never going to pay off, right? Like I said to SD, it's about perspective and focus - focusing on the "fact" that actors "will" have a negative ROI just allows that to happen... focusing on making wise investments to be sure you have a positive ROI, on the other hand, just prompts you to keep track of things. And keeping track of your business is what allows you to grow your business.

That's it for now... more on managing your resources in Monday's post. For now...

Let's get to work!

-Harold

Back To Business: The Right Time To Invest In Your Business

**Note: And we're back! Thanks for hanging with me, folks... I'm re-starting my regular Monday series today; feel free to email or Twitter me questions and/or comments; I'll respond to those messages each Wednesday!

The Back-To-Business Series: Index

If you can remember back that far, you may recall that I didn't follow my last Back-to-Business post about using PerformerTrack (remember - you can save 20% off a one-year subscription to PerformerTrack by using the coupon-code PORTLAND9 at check-out) with my usual Wednesday "Mailbox" post. That's because, for the most part, all the responses I got went something like this:

It sounds like a good system. Maybe once I start making money I'll buy-into-it. (Ft. Washington, MD)
Once I get more auditions to track, I'll think about using something to track them. (Miami, FL)
Maybe once my career really takes off, I'll set PT up. (Richmond, VA)

I responded to each of these folks individually (and the 20 or 30 others who said essentially the same thing) with the following note:

Hi ______! Thanks very much for your response. I certainly understand your need to watch your spending - we're all poor actors, trying to save whatever money we can! I might suggest, though, that you're looking at things the wrong way. Is the right time to invest in your business after you've become successful? I don't think many businesses can make that equation work - they have to invest in their business to become successful! We'll talk more about this in next week's post.

Of course, "next week's post" was a bit misleading :) My little vacation aside, though, think about the logic of what these people were saying... Did General Motors say they'd hire people to make cars once they'd sold some cars? Did Coke say they'd buy a case of bottles after they'd sold a few bottles of soda? Of course not... those businesses had to invest some money to start up, and once they'd sold a few products they had to invest the money they'd brought in to make more and better products.

That doesn't mean these businesses had to drop a million dollars at the beginning, of course - they were small businesses run by individuals, just like we actors are. They had to keep their costs down to maximize their profit and build the funds they needed for re-investment.

Ok, hold on there... I actually felt your eyes glaze over as I wrote that - that "Nightly Business Report" language tends to make actors - and, indeed, most Americans- blood pressure go up, I know... take a breath. All I'm saying up there is that these businesses - and we, in our acting businesses - need to keep costs down, so they - and we - make more money when we get paid. (ok, you probably got that part...) The toughie, though, is that once you - and they - get paid, some of the money brought in needs to be re-invested to make your business grow.

Here, let's take a look at the proto-typical American "garage business" - Apple computers. A group of friends literally started building computers in Steve Jobs' garage (That's a picture of "The Woz" working away in the upper-left of this post!) Once they'd sold a few computers, though - they didn't stay in the garage! They re-invested their earnings in the business they were building and moved out to larger facilities... and started making Apple into the giant it is today.

Sadly, a lot of business owners - and a lot of actors - never mentally move out of the garage. Their businesses might grow beyond their garage, but their mind-set doesn't. Let me tell you a little secret™: most Americans are afraid of money. It's a hard truth - but a truth nonetheless. We're trained to worry about money from an early age. When we don't have it, we're desperate to get it; when we do get it, we don't want to part with it - OR, on the other side of the spectrum, we spend it on things we want (as opposed to the things we need) as quickly as possible - thinking we'll never get any again!

Actors are even more fearful when it comes to their money than most Americans - because our income comes in sporadically. We're never sure when the next job is coming, so we hold on to our shekels with a tight fist... and then, when we get cash in our hands, we're even more extreme about holding onto it... or we enjoy it a little too much.

We've had this attitude towards money drilled into us because Americans have come depend on "the steady paycheck." It's part of what we were brought up with - this 1950's ideal that we're going to work for a single company our entire life - a company that will keep us employed, pay our benefits, and take care of us into retirement. It's a nice ideal, and certainly one I'd like to see the country to strive to rebuild - but lets be honest, we don't see many jobs like that in this day and age and haven't for a good long while.

The acting profession doesn't work that way. Sure, maybe it used to for the lucky few who were put under contract in the "Studio Era" of Hollywood... but those days are long gone. We actors get paid on a per-project basis; we're hired on to a project, do the work, and then we move on to the next project to start the cycle over. The only way to make a sustainable living from this model is think ahead - to manage our resources (and believe me, money is just one of those resources) so we can line up a number of projects to fill out our yearly income. In essence, we need to have a certain number of "sales" (the contracts we sign with various production companies) in a given year to make a living.

And here's the thing... if you think about it, there's not much difference between that and the way GM, Coke, and Apple make their livings. These companies don't have a "steady paycheck," either. Like we actors, they don't a number of guaranteed sales each year; they have to produce their product, market it, make the sale, and then manage the money that comes in so that some goes to profit and some goes back into the business to help it grow. Just like we want to grow our careers. It's that simple.

This is what I was talking about in my video post last week - we can run around chasing our tails looking for a "job" to do until the work runs out - and then run around looking for the next "job - " or we can run our careers like GM, Coke and Apple do. We can manage our resources - money included - to grow our businesses, and increase the number of projects we work.

I've talked a lot in the past few Back-To-Business posts about the expenses related to an acting career. There are things you have to spend your money on - such as head shots and training - and there are things you can spend your money on - like a car, a web site, or the commission you pay to an agent. You can get by without spending money on those "can" things I just mentioned... but what are you giving up by doing so? How many opportunities to book that next project - and fill out your income for the year - are you giving up by NOT having a car, web site, or agent? When thinking about places to invest your acting money, that's the question you need to answer. Not "what will I get for my money," but "what will I lose out on by NOT spending the money.

Like I said above, money's just one resource that we as actors - and any business person - needs to manage. I'll get into some of those other resources in next week's post. As always, feel free to email or Twitter your comments and questions. For now...

Let's get to work!

-Harold

Back-to-Business: A Taxing Situation III - Mailbox

The Back-To-Business Series: Index

Hey there folks

I actually got quite a bit of mail related to my last post in the Back-to-Business series. Some people were surprised when I suggested setting up a separate account for their acting income, and had a lot of questions about how to go about doing so, like...

... what you say makes sense, and I think I'll go ahead and set up a new account. I haven't made any money acting yet, though - won't my bank need me to put some money IN the account when I set it up? JL (Philadelphia, PA)

... what I want to know is what's the best bank to set up an acting account at? AS (Saint Paul, MN)

...When it comes to using money I have earned from my day job to pay for say a class or head shots, would it be best to take the money out of my personal account and deposit it into my business account in order to track the expenses and then note the deposit was not a payment for services or just pull from my personal account? LH (Portland, OR)

They probably will, JL. Depending on your Bank's policies, they might want as little as $5.00 or as much as $100.00 to start a new account. That doesn't mean that you have to make $5 or $100 as an actor before you set up your business account, though.

LH's question touches on this fact - businesses get venture capital all the time to help them start up; there's no reason why YOU can't invest in your business, just as a venture capital firm would, to help pay for your start-up costs. Just "loan" yourself the money you need to open the account - but record it in your records as a loan, not as income.

We're going to get a little more into basic accounting in a future post, but think of it like this - you as an individual are loaning your business a certain amount, with the understanding that your business will pay back you - the individual - in the future. Make a commitment to yourself (as a start-up business would commit to its investors) to pay that loan back within a year - heck, you can even commit to paying the loan back with some sort of interest. Setting things up with this in mind starts you down the path of thinking about your acting business as a business - It's makes your career about more than just going "finding a job." It focuses you on building a profit that you can return to your biggest investor - yourself.

As to the "best bank" to set your business account up at, AS... I can't really make that judgement for you. You have to look at the types of fees the banks in your area charge, whether they have a minimum balance requirement (more on that in a second), whether they offer checks and a Visa or Mastercard debit card (essential for paying your business expenses!), location, hours of operation... etc etc etc.

I myself prefer to keep the money I make in my community, instead of giving it to a large private bank... we've seen what some of the large private banks have done with our money in recent years. With that in mind, I've opted to keep my business account at a local credit union here in Portland. That's me, though... you'll need to figure out which bank is right for your needs.

...It sounds good in theory, but I don't make enough from acting to keep the money in a separate account. I have to pay my family's bills and that takes every dollar I get. BJ (Oakland, CA)

I see your point, BJ. Hell, more than that, I know exactly where you're coming from - there are some months where my business account has around $23.00 in it because I've taken "draws" out to pay my family's bills (again, "draw" is an accounting term... we'll get into that in a future post). We run into unplanned expenses from time-to-time, and the money has to come from somewhere. Luckily, the money's there - and it's ours to use.

Don't think of your business account as a "lock box" that you can't touch (remember Al Gore and the "Lock Box?" Still comedy gold...) If you're a Sole Proprietor, then you don't have to keep every dollar you make "locked up" for your business. You're not paying anyone's pension (unless you hire employees... but that's another subject entirely). As far as the IRS is concerned, your Schedule C income is yours to do with as you will.

This actually touches on another question I received:

... so if I put all the money I get from acting into a business account, how do I get it? Do I write myself a check for a salary? KD (Albuquerque, NM)

Yes and no. This is one of those accounting things we're going to get into later on... but as I said above, the IRS considers your 1099 income your money, to do with what you will. That means that you can write yourself a check (or transfer funds electronically through online banking) any time you like. It's not salary per-se, though... salary is an expense that businesses pay to employees. Since you're not an employee of your acting business - you're the OWNER of the business - you don't get a salary. You get paid as a "draw" on your business's "equity..." which isn't recorded as an expense for tax purposes.

As I keep saying, though, concepts like "draws" and "equity" are topics for a future post. For now, we're going to focus on tracking your income and expenses for tax purposes - and next week we'll focus on some tools for helping you do that throughout the year so tax season won't be so taxing. Keep your questions coming - email them to me, or feel free to shoot me a message on Twitter. Til then...

Let's get to work!

-Harold

Back-to-Business: A Taxing Situation III - Bank Run

The Back-to-Business Series: Index

So, my last post left you with a little tease... I mentioned a way for you to get all your business income and expenses for the year tabulated on a sheet of paper, and sent to you in the mail (or electronically) every month. Of course you probably already have something like that sheet of paper... it's called a bank statement. Now, the bank statement you receive is most likely for your personal bank account - it's not going to help you separate out your business expenses, though -unless you set up a separate bank account for your acting business.

Now, a lot of my new business coaching clients freeze up when I suggest they open a separate business account... it sounds complicated; it sounds like a lot of work; it sounds expensive! Before you start to hyperventilate over the idea, think about it - does the CEO of Target pay his company's business expenses out of the same account he pays his family's grocery bill with? That'd just be silly - and improper... the IRS frowns on people dipping into company funds to pay for private expenses! I think they have a word for that... starts with the letter E...

Lets go at it from a different angle - does a plumber buy his supplies out of the same account s/he pays the rent with? S/he could... but there are a lot of costs associated with running his/her business - does s/he really want to come up short on the rent next month because s/he had to buy a few too many flapper-valves? Sounds like risky business... and not the kind with Tom Cruise and Rebecca De Mornay. S/he keeps the business funds separate from his/her personal funds - and s/he "pays him/herself" periodically out of the business funds to cover personal expenses.

Remember what I said last week about 1099 income and "Schedule C's" - if you're reporting to the IRS on a Schedule C, they think of you as a business. That means you have to behave like a business - just like the CEO of Target or our hypothetical plumber. Otherwise, our friends at the IRS might not accept your income as business income. They might decide that its "hobby" income instead... and like I said a while back, a model train collector can't write off his/ her tracks.

Besides, it's not really all that complicated... most banks or credit unions will let you open a second checking account for little or no money. Your business account doesn't necessarily have to be what your bank calls a "business account" - an account which often has extra fees associated with it. If you're running a Schedule C business (as opposed to a corporation or LLC), all you need is a separate checking account to put your 1099 income into, and to pay your 1099 expenses out of.

Paying your acting expenses out of your business account has an added advantage - aside from seeing all your business income and tax deductible expenses laid out every month on your bank statement. It gives you a fund to save up for those business expenses. How many times have you heard an actor say that s/he needs new head shots, but doesn't have the money for them? If you put all your acting income into a separate account, and leave a portion of that income in the account after taking a "draw" for you personal expenses (that's an accounting term that I'll go into in more detail later)... then you'll build up the money needed to get those new head shots. Or that new PDA. Or to pay for that demo reel. Or... you get the picture.

But wait a minute... What about W-2 income and expenses? Remember the difference between 1099 (or Schedule C) income and W-2 income... 1099 is "self-employment income", and W-2 is "Wage" income. If you get paid as a W-2 employee, you can still take expenses related to your career off on your taxes (the rules for this are a lot more restrictive, though - consult a tax professional in your area about this). The income you receive, however, is categorized by the IRS as the same type of income you might get from a restaurant, or as a temp - it's not "business" income in the IRS's view. They expect that pay check to go right into your personal checking account.

A lot of actors still want to get a statement of their acting expenses every month, though - even if they're primarily paid W-2 income. They use a credit card for this purpose - they simply charge all their acting expenses to the credit card, and they pay the card from their personal account. Depending on the way your taxes are structured, you might even be able to deduct the fees and interest on that credit card - but again, these rules are very restrictive, and you should really check with a licensed tax professional on the details.

I myself am not the biggest fan of credit (and by extension, debt) - I've seen too many people get in over their heads by thinking they can charge something now and pay for it later... and later... and later... all the while getting buried in interest fees. If you decide to go this route, be sure that you've got the money to pay off your credit card balance at the end of the month. Don't get dragged down paying off debt you've accrued, when you could be putting that money towards saving up for the tools you need to do the job - and the tools that make doing the job easier.

Here's the thing, though - how are you going to know whether you have enough money to pay off that credit card balance at the end of the month? We'll go into some tools to help you keep track of your money - both W-2 and 1099 - in next weeks post... and these tools will make next year's taxes even easier! I'll see you then - remember, you can always email me your questions, or pose them to me on Twitter. I answer reader questions each Wednesday (or, some times, I write a whole new post around them!) For now...

Lets get to work!

-Harold

Back-To-Business: A Taxing Situation II - Track The Money

Sorry about the late post, folks... once again, the "scheduled posting" function doesn't seem to have worked on Blogger; I need to get better about checking to be sure my posts go up when they're supposed to. My apologies!

The Back-to-Business Series: Index

So, do you hate me after last Monday's post? Did you curse and scream your way through collecting receipts and figuring out how much you drove and whether that drink you had with your actor friends was a legitimate expense or not?

Sorry about that guys... I really am. It stings me more than you know to see actors sweating at tax time, trying to pull all their paperwork together in a race to get their taxes in by the deadline. It really doesn't have to be that way - not if you do a little preparation and management throughout the year.

A large part of my private business coaching sessions with actors is dedicated to setting up systems; systems that - when they're followed regularly - make tax time a lot easier, and keep actors on top of their business throughout the year. Over the next few weeks we'll go over some of these systems - and hopefully you'll start keeping track of things, making next April a lot easier.

As I said in the first post of this series, IRS rules determine a lot about how we do business. The IRS tells us what expenses we can write off - and by doing so, they tell us what we should be investing in to grow our business. You've probably heard the old saying "you have to spend money to make money," right? That saying gets to the heart of what we report to the IRS every year - expenses and income - and it also gives a nod to the reason for most of the stress people feel at tax season: the hustle of pulling together all their pay stubs and receipts to show how much money they spent to make their money.

You can cut down on that stress a great deal if your acting business income and expenses are already separated from your personal income and expenses. One of the simplest and cheapest tools an actor can use for this: a manila file folder. That's it - costs you just a few cents per folder. When you buy something for your business, you put the receipt for that purchase in the manila folder (making sure to note the purpose of the expense - like "Lunch with Director ____," or "Photos by ___"... you get the idea. Remember, if you ever get audited, documentation is everything!). When tax time comes around, you open up the folder, separate your receipts into the categories listed on Actors Tax Prep's handy expense list, and you get to work filling out your tax form.

Hey, while you're at it, invest another few pennies in a second manila folder, and put the pay stubs for jobs you've worked during the year (or copies of the check, if there's not a stub enclosed) into it. That way your business income is ready to be reported as well - you just have to sort it into W-2 and 1099 income!

But wait a minute... that's not really making the tax process much easier... you still have to sort your receipts and pay stubs to get your taxes ready. There's got to be a better way to do it so you don't have to spend so much time in April... what if we pre-sorted our expenses and income into the appropriate categories during the year? It'd be a pain using our manila folder method... you'd have to open the folder every time you got a new receipt, paper-clip it to the other receipts in that category... eh. What a pain!

Unless there was a way to divide your expenses and income into categories automatically... like, maybe, one of these? Costs a little more than a manila folder... but it saves you time in April, because you can assign a category to each pocket at the beginning of the year, and then drop your pay-stubs or receipts into the appropriate pocket as the year progresses. Come tax-time, your paperwork is all pre-sorted.

Except... You still have to take the time in April (or March, if you're on top of things) to pull all that paper out and sort it, add up the numbers, and transcribe it onto your tax forms. Still seems like a lot of work, doesn't it? Isn't there a way to get all your income and expenses onto one sheet of paper, without all that labor?

Of course there is... and you probably get one of those sheets of paper in your mailbox every month! Next week we'll talk about your bank statement, and how you can use that to help you run your business... and get you ready for next year's tax season!

Lets get to work...

-Harold

The Back To Business Series

You know how I yammer on and on... This directory will help you find posts in the Back To Business Series. Remember, you can always send your questions to me via email or Twitter - you might just have your question answered in a Wednesday Mailbox post!

• 2/22/2010: Introduction
• 2/24/2010: Mailbox


• 3/1/2010: A Taxing Situation
• 3/3/2010: Mailbox
• 3/8/2010: A Taxing Situation II - Track The Money
• 3/10/2010: Mailbox
• 3/15/2010: A Taxing Situation III - Bank Run
• 3/17/2010: Mailbox
• 3/22/2010: A Taxing Situation IV - Tracking Tools
• 3/24/2010: Mailbox
• 3/29/2010: A Taxing Situation V - Using PerformerTrack
• 4/26/2010: Back-To-Business Will Be Back...
• 6/7/2010: Back-To-Business Comes Back Next Week
• 6/14/2010: The Right Time To Invest In Your Business
• 6/16/2010: Mailbox
• 6/21/2010: Aside - Acting Is Believing
• 6/28/2010: Managing Your Resources
• 6/30/2010: Mailbox
• 7/12/2010: A Question of Balance
• 7/26/2010: What Does It Mean To Be "Paid?"