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INVEST IN "YOU" : Pay Yourself First

Like it or not, a side effect of being a freelance photographer is becoming a small business owner. You are the star talent and the housekeeper/janitor. You’re the sales force and the accountant. With the right habits, choices you make for your emotional fulfillment, can translate into the reality of operating a profitable and sustainable business.

Controlling expenses and developing better savings habits is an important concept as you set financial goals. Most of us know we should be saving more money, whether it is for retirement, college expenses or simply for an emergency fund. So it’s ironic that business owners frequently pay themselves too little or sometimes, nothing at all – preferring instead to put their earnings back into their businesses. You’re the one taking the biggest risk if the business should fail. To be successful in accomplishing financial goals, you need to keep in mind an important business mantra: pay yourself first.

As your own Chief Financial Officer (CFO),

  • Establish written goals for the business to achieve so that you can receive compensation more in line with your knowledge and skills.

  • Evaluate the processes that affect your income and expenses.

  • Identify who is carrying the cost of operations to help you price your wages, products, and services.

Successful businesses accumulate wealth by creating more assets than liabilities.
Utilize two basic tools:

  • Net worth statement

  • Income statement.

The net worth statement is simply a list of your assets minus your liabilities. To clarify, your Hasselbad ™ may be an asset, but the “practice portrait” of your neighbor probably is not. Think of your income statement as a tank, where water flows in <<<<< and out >>>>>>. Be mindful of making adjustments to the amount flowing out so that there’s always an ample amount remaining in the tank.

  • Do you use your equipment and supplies or your clients?

  • Who sets the hours worked?

  • Where do you work and who pays the utilities?

  • Are you being offered any group rate benefits such as medical, dental, disability, and life insurance?

  • Who will itemize the business deductions on their tax forms?

Some professional photographers have a tough time determining what their compensation should be. Determining how much to pay yourself can be emotional. Cash flow of many businesses is unpredictable – especially during the early stages. You may want to consider relying on bonuses rather than a regular salary for much of your compensation. By doing so, you can determine when and how much the business can afford to pay you. Bonuses may come once or several times a year depending on your needs and the business’s performance. It is OK to seek out additional sources of income, if your enterprise is not generating enough cash yet.

Try this exercise of creating an income statement: On the left side of a sheet of paper, total up monthly incoming cash flow sources such as wages, investment income, and bonuses. On the right side, track your expenses for a typical month, writing down every dollar spent. Include all the regular payments you make each month, such as mortgage or rent, education, utilities, groceries, gasoline, and day care expenses. Assign a monetary value to the time you devote to non artistic business activities. Don’t forget about ongoing expenses that aren’t as obvious, such as taxes, insurance premiums and home repair expenses. If you have a bill you pay several times a year, factor that into your calculation.

Try this exercise of creating an income statement:

cash flow sources   Monthly Expenses  

investment income, and
photo sales / residuals








mortgage/ rent,
designer coffee,
day care expenses,
photography expenses, etc.


Now you can easily see your income, expenses and what is left to save. The best business owners take a hard look at expenses and identify where reductions can be made. One trick is to annualize expenses. This method quickly identifies the biggest flexible expenses, such as the daily purchase of designer coffee that may be costing $1000 a year.

Now, let’s take a look at how you can pay yourself first. Consider a systematic investment program that lets you save the same amount each month. By doing so, you are not tempted to spend the money before you get a chance to put it into a savings vehicle. Also consider joining an investment group where you can pool together ideas and money. It’s easy to accumulate funds and reach your fiscal goals by investing a modest amount. For example: if you invest $200 per month, after 10 years you would have invested $24,000. But, assuming a six percent compounding rate of return, the value after 10 years would be $31,633! As you can see, even if you contribute small amounts each month, it can quickly add up.

The amount you can save in your retirement plan, such as an owner only 401K or S.E.P. IRA, is calculated based on eligible compensation. Generally, the more you earn, the more you are able to save. Because of the tax advantages and substantial contribution limits these accounts offer, you can help keep yourself on track to achieve your retirement planning goals by making the maximum contribution each year.

Developing a retirement plan and sticking with it takes time and commitment. Seek out professional advice to for coaching and customization. I love being a financial consultant because it’s creative, fun, interesting, and meaningful. My days are similar to the time when I was a film producer and editor. There are always meetings, phone calls, and opportunities to generate business. Each relationship is filled with asking questions, listening, and creating a holistic and viable solution. My transition to this career occurred when curiosity, greed, and fear inspired me to seek out financial information and expertise. I had a few left hemisphere headaches when I started, but it’s been worth the effort to learn another career, secure my financial future, and help others along the way.

A.G. Edwards does not render legal, accounting or tax preparation advice. Please consult your legal and tax advisors for your specific situation. This article was provided by Shãn Sutherland, Financial Consultant, Accredited Asset Management Specialist, located in Beverly Hills, California. A.G. Edwards & Sons, Inc. Member SIPC.

Special thanks go to the Alumni Association at Art Center College of Design, in Pasadena California USA.

Learn more about retirement planning with stocks, bonds, mutual funds, life insurance, and long term care, by visiting http://www.agedwards.com/fc/shannon.sutherland  or calling toll free (866)344-5287 ext. 229.
A.G.Edwards generally acts as a broker-dealer, but may act as an investment advisor on designated accounts, and the firm’s obligations will vary with the role it plays. When working with clients the firm generally acts as a broker-dealer unless specifically indicated in writing. To better understand the differences between brokerage and advisory services, please consult Important Information About Your Relationship With A.G.Edwards on agedwards.com/disclosures.

Shannon Sutherland, Financial Consultant
, Accredited Asset Management Specialist,
& Sons, Inc. Member SIPC
Beverly Hills, CA    (866) 344-5287 ext. 229.

WIPI suggest two programs to help you "go for the money," secure your clients and do your follow up work. Freshlists.com, provides mailing lists for Photographers, Illustrators & Reps to reach Ad Agencies, Design Firms, Magazines, Book Publishers and Record Companies and FotoQuote.com an electronic price guide for stock and assignment photography, the only source of pricing information for photographers that gives you powerful Coaching help in every one of its 218 pricing categories.

Photographic Art Market
Maria Piscopo / Marketing