Five Mistakes Writers Make With Their Money
“I’m going to teach you to HATE spending money.” - BREWSTER’S MILLIONS
Screenplay by Herschel Weingrod and Timothy Harris, Directed by Walter Hill
(5-min. read)
Most creatives fall into one of three categories when it comes to spending money. The first is to hoard as much of it as possible from each paycheck because they have no idea if they’ll ever work again. The second is they’re drunk on happiness so they spend it on all the things they dreamed of spending it on while they were broke. There’s a third category that’s as rare as a Bigfoot sighting and it’s those who invest it. There are serious issues with all three strategies. Yes, even the Bigfoots (Bigfeet?) but I’ll save that for another post.
We'll discuss common mistakes that I’ve either witnessed or have experienced myself as a fellow creative. Whether you fall into one of those three categories or not there’s a good chance you’re making some of the following common mistakes. Let’s dive in.
1) LACK OF A BUDGET
Many of us can create a budget for a vacation or a shopping trip. But creating a budget for your life is more comprehensive with many moving parts. It’s also imperative for those with variable income. For most writers the budget “is not my job.” True! You became a writer not a Line Producer! Don’t let the budget handcuff your creativity. But you also know that a budget for your script is extremely important if you want it to become a reality. The same goes for your life goals. If you want your dreams to become a reality then budgeting for them is important.
Changing your mindset is a good place to start. For some clients the word “budget” evokes misery. Cool, then change it. I’ve heard people use Spending Plan or Cash Flows instead of the dreaded B-word. You can create a basic Spending Plan with two columns. Column A is the exact amount of money flowing in. Column B is the exact amount of money flowing out. Cash Flows. Get it? It sounds easy enough but, for some, the hardest part is being honest. How much do you actually spend each month on entertainment? There are apps out there like Mint or YNAB (You Need A Budget) that can help you. Many banks have a similar, but less precise, tool like a Spending Summary built into their online platform. However you start to Plan your Spending, just start.
2) AIMING FOR JUST ENOUGH
“I just need to make enough to pay my bills.” Hoo boy I can’t tell you how many times I’ve said that in my life. This mindset can be so limiting.
If you focus on the amount you need to earn in order to pay those bills then you may be limiting your earning potential. When I was in that headspace I would often make enough to pay the bills then coast the rest of the month without putting in much effort. I was just spinning my wheels and getting nowhere. Then I came up with a little mental trick. After knowing the amount needed to pay my bills I did one little thing: I raised the amount. It didn’t matter if I needed $2000 a month to pay my bills because the new amount was $2500. By the way, this was 15-years ago folks, please don’t judge. The point is it doesn’t matter what your monthly bills are; you may want to raise the amount and aim for that new goal.
3) HOPING FOR THE LEFTOVERS
Although we should all hope to have a beautifully touching limited series on HBO, the leftovers I’m referring to have to do with your monthly spending. You’re probably never adding in the most important bill: savings. Most people pay their bills and “if there’s anything left over” they might put it towards savings. This is one of the biggest financial mistakes you can make.
Try to include your savings as part of your monthly bill. You should have a monthly budget that includes internet, car payment, mortgage/rent, insurance, SAVINGS, groceries, utilities, etc. Make that part of your monthly spending and make sure it gets paid. This is also the reason why you raise your monthly bills (see #2).
4) LACK OF EMERGENCY FUND
It doesn’t matter where you are in your career, if you don’t have a sufficient amount of money to withstand long periods of no work, then most of this other advice is pointless. Other industries recommend having 3-6 months of an emergency fund available but we know that’s a joke in the Entertainment Industry. You can go without work for six-months every year. So dipping into your emergency fund annually doesn’t make sense.
Professional screenwriters and directors should have between 9-18 months of living expenses set aside, in my opinion. Knowing that you have this in your back pocket may allow you to focus on your creativity. Once this Emergency Fund is established you don’t have to worry about “rainy day” money or if you’ll have enough to pay the rent/mortgage. The answer is yes, you have it. Now you can start putting money into a vacation fund, down payment for a home, retirement account, investments, entertainment, etc.
5) NO PLAN
All of the other four mistakes can be boiled down to not having a plan. Similar to the characters you create, your money should have a purpose. Every single dollar that you spend should have a specific intention. What is this dollar going toward? Is it intentional? The more specific you can be with your money the easier it may become to avoid pitfalls.
When you sell a script or receive a large sum of money try to avoid saying things like “I’m going to put some away.” What does ‘some’ mean? Instead, you might want to allocate a specific amount into savings and your Emergency Fund. How much exactly is going toward a down payment for a house? Have a plan. “I’m going to max out my IRA contribution and then put $10,000 into my Emergency Fund” is a more specific plan.
In short, you don’t have to hoard your paycheck and think one is never coming again. You also don’t have to spend it wildly. If you start with a plan then you can avoid making some drastic, and common, mistakes.
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