Making Tomorrow A Better Today

How do we define success? And, more importantly, what does it take to achieve it? For actors, those answers might be “Being a series regular on a night-time drama” and “Consistently honing my craft and auditioning regularly”. For a photographer, they might be “Shooting a cover for National Geographic” (or Cosmopolitan, depending on preference), and “Constantly shooting in different conditions to increase my skill”. It will differ from person to person, and from art form to art form, but I want to give you one key to what it takes that applies across the board, be it art, business, finance or sport:

“The secret to you success is determined by your daily agenda… by the daily decisions I make, and the daily disciplines I practice” – Dr John C. Maxwell

I heard that statement in a lesson a few years ago, and it is something that has always stuck with me, because I fundamentally believe that it is true. Another way of saying it is that, if what and where I am today is a direct result of my previous actions, what I am tomorrow depends on what I do today. The problem is, most people underestimate what they can do today, and over estimate what they can do tomorrow.

Now, if you think about this for a minute, you will see how true it is.  You constantly hear “I’ll do it tomorrow”. I know I say that, and then, when it doesn’t happen tomorrow, it becomes “the next day”… then the next… then the next, until either we hit a crisis and do it at the expense of something else, or we just never quite get around to it.

Taking acting as an example: how can you book any jobs if you don’t audition? And how can you audition if casting directors aren’t seeing your headshot? And how are they seeing your headshot unless it is being put in front of them? So how many submissions are you or your agent making today? How many workshops are you attending today? What networking are you doing today? What are you doing today to hone your skill so that, when the opportunity arises, you perform to the best of your abilities? But maybe making that phone call to an agent is uncomfortable, so you put it of to tomorrow, and traffic is really bad tonight, so that networking event can wait… you get the picture.

To be continued...

Tax Tips for Actors & Artists

One thing with all this talk of taxes. One small, crucial thing.

Please remember, what everyone is interested in is tax avoidance, not tax evasion.

Claiming aggressively, using all the deductions you can etc is great - go for it (preferably under the guidance of a tax professional). This is tax avoidance, and is the game every good accountant is playing for you. If the IRS audits you, and has a different opinion as to what you should have deducted, then you have to pay some back taxes, some interest, and you are sent on your way with a slap on the wrist. Annoying? Absolutely. Criminal? No.

HOWEVER, not reporting income, hiding money etc falls in the tax evasion category... and even minor infractions here can get you in serious trouble (fines, criminal charges and so on). So please, avoidance not evasion should be the mantra when going through the tax process.

A great book on the subject is by Sandy Botkin, and is called How To Lower Your Taxes Big Time. Hardly a light and fluffy read, but a really good one for those interested in lowering their tax burden.

Postage Hike - Acting Submissions

Something for all actors to be aware of - you don't want your submissions to not reach their destination because of this!

Postage Hike May 12, 2008 - Los Angeles Acting blog by David August

Actor's Tax Season - more!

The second part of the piece  Tax Season Starts When?. Also a link to TAE with a great article from the Actors Tax Prep guys. It sends up all sorts of red flags when actors et al deduct clothing, movie tickets, manicures etc, because, with certain exceptions, we are not allowed to do it!

Anyway, soon taxes will be a thing of the past for a while, but I really want to emphasize the need for everyone to be working all year to keep things in order. That way you get to keep more money,and avoid the headaches of audits and so on.

Tax Season Starts When? (part 2)

Become familiar with the tax system and how you can maximize your return.  One way is by starting a home-based business.  You can earn money and with the deductions you will have, such as a portion of your rent/mortgage and your utilities, you will be able to keep more of that money in your pocket.  You can even write off your losses against other sources of income.  The best thing to do is hire a tax professional to handle your taxes, someone who will be able to maximize the amount of money you can save.  Remember, you have to spend money to make money.  There are, for example, accountants that focus on preparing tax returns for actors and/or other entertainment industry professionals.  An accountant that specializes in filing returns in your area of expertise may be your best choice.

Finally, there is an avenue that is available to explore, yet is something you may not be aware of, may not have considered, or simply may not believe is even possible.  This are tax advantage investments, such as retirement plans, self-directed IRAs, and real estate.  I know you may be thinking this is crazy, you hardly make enough money or you don’t know anything about investing, but if you take it one step at a time and do your homework, there are ways that you can actually have your money start working for you.

The key is to know your options, be organized, and conduct yourself in a professional manner.  A very helpful resource to understand taxes better is the book Lower Your Taxes – Big Time!  Wealth-Building, Tax Reduction Secrets from an IRS Insider by Sandy Botkin, CPA, Esq.  You will find valuable tips and rules explained in a way that completely non technical people can understand.  The chapter entitled “How to Shield Yourself from the IRS Weapon of Classifying a Business as a Hobby” is absolutely critical and will pay you back for the cost of the book many times over.

Whatever you do, do not leave your tax preparation until mere weeks before your return is due to be filed.  This will cause you an un-necessary amount of stress and may cause trouble for you with the IRS if you do not have your documents in order.  It may also cost you money you can’t afford to pay.

The Actors' Enterprise: Blog and News<br>: Actor Tax Myths

Tax Season Starts When?

You have just filed your taxes and you breathe that sigh of relief.  It’s over for another year.  Or is it?  The answer is NO, or at least it should be, because tax season is just about to begin.  That’s right.  The organization it takes to make the most of your taxes begins now.

As artists it is essential to understand that regardless of your current income, if you actually intend to make money from your craft, there are ways in which you must treat it like a business.  There are two critical concepts you must become familiar with to be fully prepared to do your tax return.  Without them, you are not running a business – you are engaged in a hobby – and should never expect that hobby to be financially profitable.  The first is you MUST be organized.  Organization means being sure you have all the documentation you need and that you have a place for everything and have everything in its place.  You might find that a computer-based program, such as Quicken or Quickbooks, is the answer to keeping all your records in order. If you are more comfortable with paper then be sure to get a paper organizer that is efficient and easy to use.  Actors have an enormous resource in a company called Holdon Log.  They provide both computer programs and carefully designed log books that allow actors to record everything from auditions and callbacks to expenses related to creating and maintaining your professional image.  Find tools that work for you and USE THEM throughout the year to keep the records you need to efficiently and effectively file your taxes.

The second important concept is to keep your business finances separate from your personal finances.  Have one bank account for each business you have and use this account to pay all your business expenses.  This is a professional way to conduct your business affairs and it is a good way to keep your records in order.  Again, remember that your acting, photography, writing, or any other creative career is a business and should be run out of a separate bank account.  If you do not have funds in your business account then loan your business some money and keep careful track.  The business can pay you back when times are better and in the end you will know that your business paid its own way.

Why Financial Education Should Matter To Everyone

I was reminded of the phrase "broke at a higher level" last night talking to a writer friend of mine who has been hit hard by the writer's strike and its aftermath.

What it simply means is that just because someone is making  lot of money does not necessarily mean they are in a stable financial position. They might have a bigger house, a nicer car, travel more - lots of things that we may want - but they are still in the position of having to work day in and day out for it all. If work suddenly dries up for them - as it can in any profession - they are stuck, because they need to make their forty thousand a month just as certainly as we need to make our four thousand to survive.

We see this constantly in the film industry. Actors will have one successful show, but then may not work again for a long time, or only pick up bits and pieces of work here and there. If their lifestyles have been built on spending all of the money they earned while the show was running, they are stuck. The same happens with writers, directors, producers... all it takes for most people to become financially unglued is a month or two out of work, wether you earn thousands or tens of thousands.

How different could it have been if they had really learnt about money before they had a lot? If they kept their lifestyles the same for a couple of years, and socked away enough money to live on for the rest of their lives? If they knew how to control spending, invest, structure themselves properly... In the same way that 80% of lottery winners are bankrupt within three years because they never learnt how to handle money, so actors, artists, writers etc who suddenly start making a killing hit the same problem.

That is why learning about money is so important. How to handle it, how to make it grow, what to do with it so we can live on it forever... these are things everyone needs to know, but we as artists, with our fluctuating income, need it more than most. 

What Financial Freedom Really Means (2)

I want to carry on where our previous article on Financial Freedom left off. For those new to the topic, please see our entry below, but the fundamental concept of financial freedom is:

Having a passive income greater than your living expenses.

The question, of course, then becomes "so how does one achieve this?"

First, for clarification, we need to review passive income briefly. Passive income is money that comes to us whether we work or not. It can (and should) come from a number of sources, but some of the most common ways of earning it are: rental income from real estate you own, dividends from stocks, insurance, network marketing, and interest on loans you make (there are many other ways, of course, but that covers what most people can go out and actually do). The opposite of passive income is active income, and is where you get paid for the work you do, either as an hourly wage or a salary. The problem is, and this applies whether you are making minimum wage or $500 per hour, if you have to work for all your money, then the moment you stop working, you stop getting paid. You want to take a month off? Your yearly income just dropped by 1/12. Three months off? It just dropped by ¼. Not pretty. 

Passive income, however, keeps coming in whether you are punching a clock or on a beach in Belize. For those of you who currently rent, do you know where your landlord is every month? Probably not. But you still pay your rent by the 5^th of each month, right? It doesn’t matter if he is sweeping the corridors or sipping a cocktail, that money is coming into his bank account every single month. And not just from you, but from the tenants in all the other properties he owns as well.

SO, how do we make this work for you? First, you need to email us at mailto:info@abundancebound.com, with “Chart of Accounts” in the tag line, so that we can send you an excel spreadsheet that will help you work out where your money is going each month, and how much you need to cover your bills. This will give you a current “snapshot” of your financial situation, and will include rent/mortgage, groceries, utilities, artistic expenses etc.

From this you will have a number, let us say $4,000 per month, that you need to earn to keep your head above water. This amount would become your first passive income goal, because the second that you are earning $4,001 per month, you are able to live, indefinitely, at that standard of living, for the rest of your life.

The question then becomes how to reach that goal, and develop that level of passive income. That is where financial education comes in, and to answer that, let us look at the list we started earlier. The first item was rental real estate, and let’s say that this was what you decided to focus on. If you do your research around different rental markets in the country, it becomes entirely possible to find properties for sale at a reasonable price that will generate $200 per month in positive cash-flow (money left after all taxes, mortgage etc has been paid). So you purchase one of these (with money from your wealth account), and now add $200 per month to the acceleration of your “wealth cycle”. Four more properties like this, and you are ¼ of the way there. Then you start to look at dividend paying stocks, and some Oil & Gas, and maybe a business or two…

Does it start to make sense? I hope so, because I remember my own sense of shock and excitement when I realized that the goal of all my financial dreaming was something tangible and obtainable: I just hadn’t realized what it was. Because this really is the financial goal of life: get your passive income above your expenses. Some people wait to do it until they are retired, and pensions and things of that sort kick in. Most never achieve it, and either work some kind of job or rely on somebody’s charity, until they die. But with some education, some planning, and a little courage, we can all have it three to five years from now. Five years time is coming, whether you get into action on any of this or not. The question is, will you still be in the same place, doing the same thing? Or will you greet five years from now on the beach, drinking champagne, knowing that everything is paid for whether you go home next week or next month. And, more importantly, free to pursue your acting career as and how you choose?

The choice is yours. What I hope we made clear in this article is what that choice is.