Dramatizing Money
photo of a calculator, pen, and array of USD twenty dollar bills sitting on top of US tax forms

The first line of one of the most famous financial guides reads, “Bansir, the chariot builder of Babylon, was thoroughly discouraged.” If you’ve read The Richest Man in Babylon, you’ll recognize the line immediately, but even if you haven’t, you’ll likely recognize the feeling of being “thoroughly discouraged.” It is a thoroughly discouraging time, in a thoroughly discouraging industry, with some thoroughly discouraging financial realities.

And yet we continue, despite being thoroughly discouraged. Why? Because the work we do matters. In the following paragraphs, we hope to help you feel a little less discouraged by answering some common financial questions that come up for dramatists throughout their careers. We can’t eliminate some of the challenges. But we can help them seem a bit less challenging. After all, you can do this. Just like Bansir.

What Should I Be?

The root of this question is practical, not philosophical (at least in an article about money). In the context of a dramatist’s career, it relates to entity type: the type of business structure they choose to house their professional income and expenses.

As you make your choice (a choice, by the way, that can change over time), you’ll want to consider a few things: (1) who is involved in the business, (2) how much time and money you have to devote to forming the entity, (3) whether you want or need built-in liability protection, and (4) the tax implications of your choice.

The major choices (from simplest to most complex) are sole proprietorship (one person doing business for themself), limited liability company (one or more people who formed a company together with built-in liability protection), or S corporation (a slightly more complex entity formed by one or more people with built-in liability protection and some potential tax benefits). There are some newer options in some states for socially conscious entities as well, like L3Cs or B Corporations (plus ways of getting those benefits through a certification program instead), but generally they build off the three main choices: sole proprietorship, LLC, and S Corporation.

Early On

Early in your career, your job is to make great work. Focus on that at first and give yourself permission to figure out the formal entity type details later.

The default entity type option is a sole proprietorship, and for many writers, that entity type makes sense for the duration of their careers. Depending on where you are located, you may not have to do anything to create a sole proprietorship. (New York is an exception; you’ll want to register with your county.) If you are using a name that is not your own—like a pen name or a special business name—you’ll likely need to register that name with your state. You can also choose to use an EIN (from the IRS) instead of your Social Security Number for the business, but that isn’t required. There is no inherent liability protection with a sole proprietorship, so you’ll probably want to investigate a business liability policy as well (just in case).

After Some Time

After some time, your own calculations about risk, taxes, and others involved in your business may change. And then it may make sense to form a Limited Liability Company or an S Corporation. LLCs are easier to form and maintain each year (especially if you are the only owner), but S Corporations allow you to pay yourself a salary, reducing the amount of net income subject to self-employment tax. As your earnings increase, this may be a good option, but you’ll want to talk to a tax professional to make sure.

To form an LLC or an S Corporation, start with your state’s resources. They (likely) have everything you need on the state website. Each state also houses Small Business Development Centers (SBDCs), which provide free support for business formation. Since 2020, many SBDCs have been taking virtual appointments, and they offer a wealth of resources to help you navigate registrations, licenses, and other compliance requirements. Their help isn’t exclusively geared toward creative businesses, but when it comes to entity types and other legal support in your state, their expertise (and the price they charge) is tough to beat.

What About Taxes?

Some things about taxes never change. They exist. They tend to cause feelings ranging from frustration to panic. They prompt us to declare we’ll keep better records in the future (while having no intention of changing our habits).

But there are some good things that never change as well. Ordinary and necessary business expenses can be used to offset income. Generally there are ways to reduce your taxes by saving for retirement. Looking back on what you earned and what you spent for the year is an excuse to recall the experiences you had and celebrate the victories you earned.

This accumulation of consistencies, plus the way you navigate the inconsistencies, builds your tax knowledge over time, even if you never change how you keep your records.

Early On

Early on, you might be skirting the edge of legality with your taxes (and who knows what else). After all, a young writer may not have included a $100 check for a writing gig on their tax form, especially since there was no 1099 received. But hopefully that same writer at least started thinking a little bit about taxes, perhaps even wondering if the income was taxable. (Yes. It was taxable.)

Early on, the focus is on building tax habits. Every time you are paid for a freelance gig or independent contractor work, set aside 30% for taxes. A great way to do this is through a separate savings account, but that solution may not be relevant for everyone. After all, you might desperately need each dollar of every check, without the luxury of setting some aside for a future obligation, even if that obligation is taxes. But starting the habit of setting aside (and earning enough to enable that), is huge.

If you have a W-2 job that is already withholding taxes, you can use the company’s infrastructure to your advantage. On the Form W-4 (a form you completed when you first began the job), there is a place to request that additional taxes be withheld. If, for example, you know you’ll likely earn $3,000 from freelance writing gigs throughout the year, you can add that amount to your W-4 on Line 4(a). If you want an even better estimate of what to withhold, the IRS created a withholdings calculator to help you calculate the amount to put on Line 4(c). It’s fairly easy to use. Make sure you have a copy of your most recent paystub handy (and some patience to work through the questions at your own pace).

After Some Time

After some time, the tax curiosity you have embraced early on will have morphed into some knowledge. You might have a better sense of how much to set aside. Maybe 30% is the right number for you, or maybe you need to set aside more or less. You also probably have a better sense of your deductions year after year. Your focus becomes less about learning and more about refining what you know (after all, tax laws change over time), and being a bit more proactive about taking full advantage of tax opportunities. Saving for retirement, for example, reduces your taxable income, as do contributions to a health savings account. With a bit more perspective (and sometimes a few more resources available), you can more proactively strategize for tax time. Then you can manage your cash flow so your withholdings or your own estimated payments are exactly on track. (Or at least as “exactly” as is possible with a career in the arts.)

How Do I Keep Track?

Humans are by nature optimistic beings, at least according to 2009 research from the University of Kansas. Even if our optimism has waned since then, it is still evident in our belief that there is some sort of recordkeeping system that is perfect—one that will make recordkeeping a joy, inspire a level of focus and attention we’ve never before exerted in our lives, and magically change our level of organization and attention.

Spoiler: it doesn’t exist. Oh sure, there are lots of great recordkeeping systems at a variety of price points and with a variety of features. But none of them are perfect. And very few of them will change your life.

But the truth is, perfection isn’t the goal. It isn’t the goal for a career, and it certainly isn’t the goal for a financial recordkeeping system. Good enough is pretty great. Besides, there’s always next year.

Early On

Much like with taxes, in earlier years, keeping records is all about forming good habits. Sure, those habits can look like saving receipts or using a separate credit card for professional expenses, but they are also about paying attention to the process. What do you need to do what you do effectively? Research? Support? Subscriptions? Coffee? Which projects are the most creatively fulfilling? Which are the most lucrative? Your records can help you evaluate—with a bit of emotional detachment—the answers to some of these questions. You don’t have to listen to the answers (which is sort of the joy of running your own business), but it helps to at least hear what they have to say.

In terms of where you gather this information, you might prefer a box where receipts are kept, a special tag to emails that contain receipts for business expenses, or a list of your expenses throughout the year in Google Sheets or Excel.

You might have started with a template or an intuitive sense of what information to track (the date, amount, vendor, and business purpose for each expense is a good start), but in the early years, your system is probably changing and adjusting as much as you are. You may find yourself adding columns, capturing more information, or mastering subtle changes that help the process work better (including talking to your accountant to see if they have preferences about what information to track).

After Some Time

Once you have some experience, you’ve probably outgrown Google Sheets or Excel, or an email-based system, or even a box of receipts. You may need a more organized way of sending invoices (which Excel can’t do), you may need (or want) to accept payments via credit card or ACH transfer to be paid more quickly. And you may be tired of organizing the information yourself. That’s where a software system can save you some time and sanity.

If you’ve talked to others about the systems they use, you are probably familiar with the most common ones: QuickBooks (a great system, not the cheapest, beloved by your accountant), Fresh Books (also a great system with a better color scheme and an easy way of sending invoices), Wave (also great, works like QuickBooks with similar reporting options), Personal Capital (helpful if you want to track both business and personal income and expenses), and Mint (almost too easy to set up, easy to forget about over time, free, but with a questionable relationship to your data).

There is no single system that is perfect. That’s why there are so many. Find one that works for you based on what you want it to do and what you can afford. If you spent time early in your career building some good habits and tracking information you found interesting, you likely have a good sense of what you need in a system and what you don’t.

How Much Should I Charge?

If you ask 100 people how much to charge for what you do, you’ll likely get 100 different answers. An economist will tell you to charge as much as the market will bear. An accountant may tell you to charge enough to cover your costs, plus ten percent. A utilitarian will tell you to charge as little as possible to maximize the public good. A seasoned writer may tell you to charge as much as possible given the uncertainty in the industry. A different seasoned writer may tell you to charge whatever the client can afford to do your part to support the industry. One parent may tell you to not charge too much to avoid offending the people in charge. Another parent may tell you to charge twice what you think you should to make up for past injustices.

The truth is, deciding what to charge—which can be an expression of worth—is nearly impossible. It is an art, not a science, and the art is informed by social constructs, our own socialization, our own feelings of self-worth, and industry norms that are often rooted in what we no longer consider normal. Plus, we often decide what to charge at the outset of a project based on assumptions that may or may not be right.

Early On

Early on, you may not have enough information to set a rate. That’s okay. There are some resources you can review to help protect yourself, including the Dramatists Guild’s Bill of Rights, model contracts, and best practices for various gigs. You may also review research from W.A.G.E., the minimum wage laws in your area, and the living wage standards in your area (which are usually much higher than minimum wage).

You can also have open conversations with your peers, mentors, or colleagues about what they earn, what they charge, and how they set their rates. The discussions and conversations may surprise you. Or they may not.

Pretty quickly, you’ll notice when you feel overpaid and underpaid, plus the factors that inform those feelings, which may include the type of work you are doing, the environment in which you are doing it, the output of the work, the time involved, and the creative fulfillment you gain. You’ll also probably value intangibles as much as money (especially if you have other sources of income). You may assign a higher value to the people you meet, the value the experience adds to your resume, or the lessons you learned during the project.

All of this information—the research, the resources, the perspectives of others, and your own reflections and experiences—inform your rates over time. But “over time” is the key phrase. You may not be able to capture the nuances of any of those factors at first. And that’s okay.

After Some Time

As “over time” continues and you gain experience, you probably have a better sense of how long something will take, how much you have charged other groups, and whether it is something you want to do. That experience adds depth to the art of pricing, and you can use it to gauge the worth of your work more accurately.

You’ve also probably accumulated some rejection along the way, which is as instructive as the successes you’ve gained. You may have quoted a rate and been told it was too high. You may have asked, “What’s your budget?” and heard a number that was far too low—and you may have taken the job anyway. You may have also increased your rates—when they are under your control, at least—and watched clients pay the new amounts without hesitation.

But it is still an art, not a science, and you’ll likely still lean on the experiences of peers, mentors, and colleagues to help you set, adjust, and reset your rates. And hopefully, you’ll be adding your own voice to the conversation as well, sharing your experiences with others and advocating for fair wages to be paid to everyone across the industry.

How Can I Save?

It can feel impossible to save money. And if it is impossible, why would we bother? The why, particularly for younger folks, is complex. There is a palpable pessimism about the future and whether it is worth saving for. Individuals saddled with debt and with relatively bleak earnings prospects are resigned to the fact that they will continually need to bring in income each year, and that income will be just enough to cover their expenses.

But freedom from that cycle is exactly the point of savings—even if it is only a little and even if things continue to be rough along the way. Having some amount of savings reduces the reliance on new income, both by providing passive income and the security to walk away. That’s why we save. It is to build our independence.

The savings goal can be big (and often it feels big—insurmountable, even), but the size of the goal shouldn’t be an impediment to action. Little steps still move us forward.

Early On

The amount of money you can save exists in the gap between what you earn and what you spend. If there is no gap—and for many people, there is no gap—there is nothing to save. To create a gap, you have two choices: You can increase your earnings or decrease your spending.

Early on in your career, you may not have the ability to do either. You may find yourself with limited financial upside based on the types of contracts you are getting and the other work you are required to do to stay financially afloat. You may live somewhere with a cost of living that exceeds your earnings potential. You may be accumulating interest on student debt.

That’s okay. The best thing about being in early stages of your career is time. You have plenty of it, so take the time you need. Start some healthy habits. When you get paid, set a little aside—even if it is a very little—for yourself and for your future. A jar on your kitchen counter works. So does an online savings account. So does a Roth IRA.

After Some Time

After a while, your savings may have grown (and shrunk and grown again). What we hope is that after a long period of time, you’ll have more than when you started. With that upwards trend, at some point you’ll want to think about moving the non-emergency savings out of a bank account (or the jar on your kitchen counter) and into a more robust investment.

Investing options are overwhelming, and for many folks, they present ethical conflicts: How can I invest in something I don’t believe in? The greenwashing among investment funds is rampant, and even well-intentioned ESG metrics may not fully capture the way your environmental, social, and governance goals align.

There are tools that can help—FossilFreeFunds.org is one I like—and people that can help, too. There are peer groups and advisors for hire that can help navigate the complexities of these options.

The other piece you may be thinking about when you are past the earliest stages of your career is your retirement. Even if you never plan to stop writing, teaching, creating, or contributing to the field (and I hope you don’t!), you may want to change the amount of time you spend writing, teaching, creating, and contributing to the field. Having an alternative source of income—retirement funds—can help with that in later phases of life.

As a self-employed person (or someone with at least some self-employment income), you have some special retirement savings options (with tax benefits) to explore. The most common ones are SEP-IRAs and Solo 401(k)s. These retirement plans allow you to set aside a percentage of your self-employment income (and in the case of a Solo 401(k) a personal contribution as well) for retirement. They can be a great way to supplement your retirement savings if you’ve maxed out your IRAs and still have some extra to save, especially if you prioritize tax deductions as well.

Can I Do This?

Here’s the thing: some of this is overwhelming, especially if you are reading about entity types and SEP-IRAs for the first time. But no one masters this at first. Arguably, no one ever masters this because the rules and our priorities change and evolve over time.

Thank goodness.

Thinking about money, adjusting your habits, building your knowledge, and reminding yourself of how capable you are is a lifelong process.

Early On

In early years, we focus on building habits and curiosity around money. We have plenty to learn and we are blissfully unaware of our own blind spots, while being completely convinced we have none. It’s a wonderful time to embrace that confidence and align it with action; look back at what you earned and spent every few months to satisfy your curiosity. Decide if those choices make sense for you for the next few months. When you receive money, set some aside, both for taxes and for your future self. Notice what types of records you naturally keep and build your system around that.

Habits and curiosity around money will carry you through many, many years of your career, even as things change, even when things feel insurmountably hard, and especially when you feel thoroughly discouraged.

After Some Time

Inevitably you will feel thoroughly discouraged. Tax laws will change. Savings accounts will be wiped out with medical emergencies, family emergencies, flooding emergencies, or unexpected life events. Habits that worked for you once might not work for you in a different life stage. What you value about your work may change over time, and that may or may not be reflected in your earnings.

Forgive yourself. You are not supposed to have already learned any of this. We encounter these things when we are ready for them—or when we are forced to acknowledge them. It is okay to continue building your knowledge over time. Your path of financial wisdom looks different from someone else’s, which means you likely have experiences that can help them as well.

Share those experiences without reservation or judgment. And forgive yourself for arriving wherever you are. And wherever you’ll ultimately be.

This information is provided for educational and informational purposes only and is not intended to be used as tax, legal, or accounting advice.

Related: Freelance Isn’t Free

Elaine Grogan Luttrull
Elaine Grogan Luttrull

(she/her) helps creative individuals master money in both one-on-one and group settings with the support of a long list of arts funders and advocates. She is based in Dublin, Ohio (Kaskaskia and Hopewell indigenous and cultural lands) where she serves on the board of the Short North Alliance and drinks entirely too much coffee.