‘My advice to women in general: even if you’re doing a nine-to-five job, treat yourself like a boss. Not arrogant, but be sure of what you want.’
– Nicki Minaj, rapper
So payday’s arrived, or that magazine you wrote for six months ago has finally processed your invoice – but how do you manage your money once you’ve got it? Glad you asked: welcome to Business 101.
A simple rule for figuring out how much you should be spending, and on what, is the 50/30/20 rule. Essentially, no more than 50 per cent of your take-home income should go towards essentials such as rent, utilities, food and transportation. Aim to put at least 20 per cent of your income towards financial obligations such as pension contributions (yes, really), emergency savings, student loan repayments and general debt clearance. The final 30 per cent of your income is for the fun stuff: non-essentials such as new clothes, eating out and holidays.
You might need to tweak the proportions a little depending on your individual situation – sticking to the 50 per cent rule is obviously more difficult if, for instance, you live in an expensive city (hiya London), where rent alone takes up a more-than-ideal chunk of your salary. Overall, however, the 50/30/20 guideline is a good starting point for budgeting newbies.
How long would your savings last if you couldn’t work, or lost your job? The answer should be at least three to six months. That means three to six months of being able to cover your rent, bills and day-to-day living expenses. Your spending priority before anything else should be making sure you have a comfortable financial cushion should things go wrong – what Paulette Perhach calls a ‘fuck off fund’. When you get paid, transfer money into your savings account before doing anything else, or set up a monthly direct debit if that makes things easier. Think of this nest egg as your emergency parachute out of bad situations. Don’t neglect it.
In an increasingly cashless world, it can be difficult to keep track of your spending. Check your bank balance regularly even if it pains you to do so – in fact, check your bank balance regularly especially if it pains you to do so. Most banks offer to text you weekly updates so you know where you stand. Every few months, take fifteen minutes to scrutinize your bank transactions to get a clearer idea of what you’re spending money on. Chances are you’ll discover unexpected expenditures you hadn’t factored in, and areas to cut back on. If you’re Stateside, the Mint app is brilliant for tracking spending and creating budgets, while UK banking service Monzo is supported by an app that organizes all your bank transactions by category, making analysing your spending habits as easy as scrolling through Instagram.
If you’re self-employed, tax is a little bit more complicated than just sitting back and having your employer take care of everything. First up – get a decent accountant. It’s money well spent, will save you time and generally just make your life a whole lot easier. A good accountant will also help you hang on to more of your income by advising on the most tax-efficient way of accounting for your earnings, whether that means incorporating as a company or reporting your income across different fiscal years.
Keeping track of tax owed on a monthly or quarterly basis and setting aside provisions accordingly will help you avoid getting caught short come tax season – if in doubt, over-save as opposed to under-save. That way if you have anything left over once you’ve paid your tax bill, you can treat yourself! Take fifteen minutes to set up an easy-access ISA to deposit your tax provision into, as money saved in ISAs is untaxed and can be interest-generating – so you can make your money go that little bit further before handing it over to the taxman. Some types of ISAs are riskier investments than others though, so make sure you consult an independent financial adviser and are fully clued-up before you stash your cash.
If you’re self-employed, many of the costs incurred in the running of your business (which technically is you) can be deducted from your total income to work out your taxable profit. Make sure you’re clear on the various deductions, reliefs and allowances you’re entitled to, as they’re more extensive than people often realize. File your expenses once a month instead of leaving it until tax season to decipher a pile of tattered receipts; paid-for accounting software such as Xero, FreeAgent and Freshbooks are all great at helping you keep track of your income and expenditure. FreeAgent has the added benefit of allowing you to upload photos of receipts from your phone on the go, so you don’t end up faffing around with endless bits of paper, or worse, forgetting to log your expenses altogether.
Much like death and taxes, irregular cash flow is an unfortunate but inevitable fact of life for the self-employed. With that in mind, try to resist the urge to splurge after a big fee comes through, given that there might potentially be some leaner periods around the corner. Instead, pay yourself a set monthly salary, regardless of your fluctuating earnings. Building up a financial buffer so you’re not dependent on one particular invoice – or beholden to one particular client – will allow you to make decisions about the kind of work you do from a place of security, not desperation. Regardless of whether you’re set up as a sole trader or decide to incorporate as a company, having separate bank accounts for your business and personal expenditure will make managing your income far easier, and prove extremely handy when tax return season rolls around.
You should always get a written contract clearly outlining the terms of any project you’re about to undertake, especially if you’re working for a new client. It might seem overly formal, but having some kind of written agreement in place is vital for clarifying everyone’s expectations, and protects both parties. As a starting point, your contract should spell out:
• The SOW (scope of work): outlining what is included as part of your fee, and what isn’t.
• Details on how work that falls out of scope will be billed.
• A payment schedule: especially for larger projects and those where you might incur third-party costs on behalf of your client, being paid 33–50 per cent upfront is fairly standard practice.
• Details on who’ll retain ownership of intellectual property rights for the work created, and a clear licensing agreement if relevant.
• Project timings and deadlines: be sure to include client feedback turnaround times too. You don’t want a project being dragged out by a client who’s slow to respond.
Always create a clear and itemized breakdown of the project’s deliverables, so that your client understands exactly how their fee has been put together, as opposed to mentally assigning a lump sum to an overall project. Not only does that instil confidence in you, it also means that if something gets cut (or goes over), both parties know what proportion of the budget that affects. When it comes to putting a project scope together, transparency is key.
Depending on the type and scale of the project in question, you should also consider including a cancellation clause that makes provision for a ‘kill fee’ – so that if for some reason the project is cancelled after you’ve already started working on it, you still get at least partial compensation for your efforts. Ask around among creatives who do similar work so you’re clear on what the standard terms are for your line of work – the kind of contract a writer might sign can be fairly different from that of a designer or illustrator.
You should have a clear and consistent invoicing system that keeps a record of the payment status of every job and tracks your invoices meticulously. It doesn’t have to be anything fancy – a simple Excel spreadsheet will do the trick, and there are plenty of reliable templates freely available online. Keep a copy of every invoice you send or receive, and be sure to include the following details on all of your invoices:
• Your name/company name.
• Company number (if applicable).
• VAT number (if registered).
• Your registered office address.
• The word ‘Invoice’ on the document.
• A unique invoice number to help you keep track.
• The name and address of your client.
• The date, so you have proof of when the invoice was submitted.
• Item and description: briefly outline the service provided, and give a breakdown of time spent if your final fee is based on a day rate.
• Payment terms: include clear payment deadlines and a late payment clause that stipulates penalties for clients who fail to pay you on time.
• Payment details: make it clear how and to whom payments should be made. Include your bank’s name, account number and sort code.
• Any relevant job/PO number issued by your client.
• Details of whoever commissioned you for reference, particularly if you’re invoicing the accounts department of a large company.
Set aside a weekly time slot to chase outstanding invoices, the bane of every freelancer’s life. As well as including late payment clauses on your invoices (and enforcing them), another way of ensuring timely payment is to include terms on your contracts that specify intellectual property isn’t transferred to your client until they’ve paid you in full. Essentially, this means that the work you’ve done isn’t theirs to use until they’ve paid you, which gives you greater leverage and can be particularly useful if you’ve been commissioned to create work where ownership of the intellectual property in question is important.
If you work in a creative field, it’s crucial you have at least a basic understanding of intellectual property rights – mostly for the sake of protecting your own work, but also to ensure you don’t unintentionally land yourself in a sticky situation by infringing on that of others. While social media and the Internet have made it easier than ever to share your work publicly, they also make it far easier for you to lose track of it – and for other people to help themselves to the fruits of your labour. As a creative, your ideas and output are your greatest assets, so it’s vital you take the necessary measures to avoid being exploited, misled, or just outright ripped off.
While trademarks and copyrights both provide protection for intellectual property, they do so in fairly different ways. Trademarks generally cover names, taglines, logos, or any other unique entity that might distinguish your brand from that of another company. Copyrights protect original creative works (e.g. written work, music, photographs, etc.) and give the creator of the work in question the right to determine how and by whom their work is used by other people, if at all.
If you’ve decided to set up a brand or business, your very first step should be to register your brand name and/or logo as a trademark. By registering a trademark with the Intellectual Property Office (UK), European Union Intellectual Property Office (EU), or the United States Patent and Trademark Office (USA), you’re effectively documenting your ownership of the entity in question under the law – meaning that if someone does rip you off or infringe on your trademark, it’s far easier to defend your right to it. It’s also worth making ownership of any work you create crystal clear by marking it with the copyright symbol ©, your name and the year of creation – what’s known as a copyright notice. While the UK doesn’t have a formal copyright register, if you’re US-based you can formally copyright your work via the US Copyright Office, which gives you an added layer of legal protection in the event of someone trying to copy or steal your work (although your work will still be under copyright even without this formal registration).
When it comes to protecting your rights, having a contract that clearly outlines the terms under which you’re operating is crucial. Clauses to look out for include:
IP (intellectual property) can be a hugely valuable asset, and while you should generally endeavour to retain rights to the work you produce, it’s also very common for creatives to be asked to produce ‘work for hire’ (i.e. work where your client will automatically own the IP in question). Common though it may be, if clients are asking you to sign over ownership of the work you create, as opposed to merely licensing it from you, you’re perfectly within your rights to use that as a bargaining chip to charge them more. Either way, any contract you sign should always clearly specify who’s going to retain ownership of intellectual property rights over the completed work.
While indemnity clauses are fairly standard practice, be sure to check they’re not overly broad or punitive in scope.
Is the work you generate along the way yours to keep once the project has concluded? For example, if you create six concepts for an eventual final selection of one, are the other five ideas you developed along the way yours to repurpose as you like (e.g. for a future client), or does your client retain ownership of those as well? Get clear on this upfront to avoid any unpleasant surprises further down the line.
Similarly if you’re a company employee, usually the IP for work you create automatically belongs to your employer. When signing an employee contract, be extremely clear on what it means for your ability to use, monetize or share the work you create while under contract once you’ve left the company in question. Particularly if you’re a content creator or working within media, think carefully about whether the trade-off of a bigger platform and better resources in exchange for ownership of your creative ideas is one you’re happy making.
If you’re feeling unsure about an intellectual property issue or the terms of a contract, your best bet is to get professional help and talk to an IP lawyer. Some of the most costly legal battles within business are fought over the ownership of intellectual property (Louboutin vs YSL anyone?), and even if you feel like you’re too small-time to have to think about this, you never know how big your ideas will become. The effects of decisions regarding intellectual property can be far-reaching and come into play in unexpected ways long after you’ve made them, so get protected. If you’re UK-based, the Institute of Trademark Attorneys (ITMA) offers free resources and legal advice clinics for anyone grappling with the process of registering a trademark, as does the British Library Business & IP Centre.
From landing you more prestigious gigs to boosting your profile, as a creative getting an agent can very often help take your career to the next level. At its most basic, an agent’s role is to help you manage the financial and commercial aspects of your work – negotiating contracts and fees on your behalf, and ensuring you’re fairly compensated for your work. In general, having an agent will probably also help you get more work, as they’ll likely have a network of industry contacts and insider knowledge that can lead to opportunities you’d probably find hard to come by on your own. The very best agents may well be instrumental in helping you develop your talent and career, pointing you in the direction of good opportunities and steering you away from the bad. If you’re in the market for an agent, make sure you shop around and meet a couple of different people before committing to a particular person or agency, so you have a decent frame of reference. More so than most, this is a working relationship that relies on a good personality fit – you should feel that the person you sign with has a clear and instinctive understanding of your work, your goals and your tastes.