My resume is terrible. I have only had one real job in my life, for one summer, and that was almost ten years ago. There are times when I am proud of this fact, and other times when it’s more on the “extreme shame” side of things. I’ve spent most of my life working as either a farmer or an artist; two jobs that can fill the day with work, but are difficult to translate in to “resume” type experience.
But I did have that one summer, in which I experienced the sinking feeling of opening your first paycheque and realizing how much smaller it is than you were expecting.
You know it well… there must be something wrong! Where has all my money gone?
Well, I hate to break it to you: It wasn’t your money.
A lot of it is the government’s money, some of it belongs to the company you work for, and maybe, if you’re lucky, some of it belongs to ‘future you’ in the form of an automatic RRSP contribution (and if you’re really lucky, it’s being matched by your employer).
Now, we don’t have this problem in self-employed world. Sure, there are a few deductions taken off my cheque for union dues, and for future Chris (not matched by anyone), but mostly my pay is intact.
So it’s easy to maintain that euphoria of (finally) getting paid; That feeling of satisfaction for a job well-done, and a fee earned. To the bar!!! For many many steaks!!!
DANGER DANGER
One of the biggest mistakes I used to make was not realizing just to what extent this left over amount was NOT my money.
As a self-employed artist, you still owe most of the things that the rest of the world owes (you’re not that special). The only difference is that you generally have no one taking it off for you.
It’s the illusion of wealth. A full bank account… that must mean I can buy those pretty shoes…
But that goes in the category of bad life choices. I have made those life choices. It is not worth it to spend the money. Why?
BECAUSE IT’S NOT YOUR MONEY!!
So now, before I even get the chance, I whisk that money away in to separate accounts for tax, commission, retirement…whatever.
I actually have a whole separate savings account just for tax! So that money is not touching any of my other money. Just tax. That way when the tax bill comes, that’s where the payment comes from. And whatever is left over… well… that IS my money.
How much do you take off? Well, that’s going to take some time for you to figure out. Certain deductions are set amounts: 10-20% for my agent depending on the type of gig, and 13% for HST. Other deductions are amounts I set myself: 20% for Income Tax (for an idea of what percentage you should be taking off check out: MARGINAL TAX RATES), and another 3-6% for my own personal RRSP. I tend to err on the side of too much, so that worst case scenario I end up with extra money after I pay my tax bill. Hey! Presto! Extra money.
You can also choose how you separate things out. Most of the time I just use a budgeting software (YNAB) to sort out and classify my various savings categories, but then keep the actually saved money all in the same physical savings account. But I do have a separate account for taxes ( it becomes a pretty big number by the end of the year, and can really throw off my idea of how much money I have).
TIP: If you’re opening up a few extra accounts to sort your cash, make sure you aren’t with a bank that’s going to charge you a ton of fees for the privilege of letting them keep your money. Getting organized is great, but not at the cost of 14 bucks a month (check out PC financial, or TANGERINE for some no fee banking options).
And that’s how I spend half of my cheque before I make it from the stage door to the bar. And let me tell you, it usually wasn’t a huge cheque to begin with (although with bigger cheques it’s even more painful, because 20% of a big number is still a big number #mathwhiz).
This process sucks, but what is far worse is ending up with a tax bill you can’t pay, and an empty RRSP. The illusion of wealth is not worth the cost. Putting that money away, FAR AWAY from my chequing account keeps me from looking at it and thinking I’m richer than I think.
And I’m left to spend the rest. And you know what that is?
MY money.
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