120 – Money Matters for Artists: Spending, Saving, and Growing Your Income

Laura 0:00
Listen, Nikki, I’ve managed money for companies my entire career. Not to age myself, but for about 30 years. So yes, you can call me a bean counter.

Nikki 0:11
I just want to call you old.

Laura 0:13
You’re always going to be older than I am, Nikki.

Nikki 0:15
True.

Laura 0:18
But seriously, I’m pretty passionate about being smart with your money, and this means everything from creating a budget to finding ways to lower your costs, increase your income, pay off debt, and begin saving and investing as you’re able. So today, we’re going to break this down and talk about moolah.

Nikki 0:37
Laura, this should be a really interesting conversation, because I am completely opposite you in all things money and budgeting. In theory, I agree with it all, but my impulsivity – and my bus – seem to keep me in the red more often than not. So hopefully I can learn from you here.

Laura 1:02
Hi. This is Laura Lee Griffin

Nikki 1:05
And this is Nikki May, with the Startist Society, inspiring you to stop getting in your own way and start building an art biz and life that you love.

Laura 1:14
We are artists who believe strongly in the power of community, accountability, following your intuition, taking small, actionable steps and breaking down the barriers of fear and procrastination that keep you stuck.

Nikki 1:27
Follow along with us on our creative business journey, as we encourage you on yours. Disclaimer we are not personal finance professionals, and suggest that you chat with one before making any big changes for yourself. We’re just sharing some of our own personal experiences with managing our own money today.

Laura 1:48
Okay, Nikki, so let’s get started by talking about how we spend money. I think a major issue that exists globally, especially in economies that use credit cards heavily, like the US, is that people typically don’t know exactly what they’re spending their money on every month. They may have an idea, yes, but they don’t necessarily look at the details, like their credit card statements.

Nikki 2:11
Or they may know the details, Laura, but feel like they have no other options.

Laura 2:15
Yeah, so one key thing to track spending easily in your creative business is to ensure that you separate out your business and your personal spend. So when I say that, that means your bank accounts, credit cards, etc, should have your personal and your business accounts separate. And it’s actually a tax requirement legally if you’re going to become an LLC or a corporation.

Nikki 2:40
Okay, so that’s one thing that I’m actually doing right already.

Laura 2:45
Yay, Nikki. Well, to track your spend, you can download your expenses from your banking institutions into something like Google Sheets, or you can use a helpful software program or an app that helps connect all of your spend in one place. And it’s really helpful to categorize your expenses each week to know where you’re spending the most. So Nikki, don’t you do something like this already?

Nikki 3:10
Wait a minute. Download your expenses to a spreadsheet. What is this, 2008? So I used to use Mint, which is by Intuit that also makes QuickBooks and Turbo Tax, but it was a financial tracker and budgeting tool that pulled your info from all your financial accounts and let you categorize expenses all in one place. It doesn’t exist anymore, and I’m currently trying two of the best rated alternatives, Monarch, which is website only, and Copilot, which has a website and an app. I think the app might only be for iPhone and Mac. Both seem great, and let you categorize income and expenses and create a budget. Actually, they create a budget for you based on your spending history, but then you can go in and edit it.

Laura 3:58
Yeah, because sometimes that budget might have things that you don’t necessarily need to have in your budget, but we’ll talk about that in a second. So those apps sound really cool. Are they reasonably priced?

Nikki 4:09
Yeah, they’re reasonable. I think Monarch is less expensive than Copilot. I don’t remember the exact amounts, but it comes out to a few bucks a month. Cheaper if you buy it, if you pay for a whole year,

Laura 4:22
Right. Well, once you know how and where you’re spending your money, you can determine if it’s truly necessary spend. Now this is where a budget can come in handy. You can lay out how much money you’re making versus how much should be going out the door. Now I happen to do this in Excel because I’m a total geek, but you can use a lot of different apps to do this as well, and the goal is to have your sales outpace your expenses. You can ensure this happens by removing expenses that aren’t critical to your business at this point in time, you may have heard about something called the latte effect. Now let’s say you buy a coffee at Starbucks every morning for $6; so that $6 coffee could equal over $2,000 in spend per year.

Nikki 5:09
Wow, that is a lot. You could actually spend, you know, maybe $200 and buy a really nice espresso machine, make your latte at home, and then buy a new iPad at the end of every year.

Laura 5:22
Exactly. Now also, when you look at all the services that you spend money on, there are also a lot of free tools available that could be used as alternatives to paid products.

Nikki 5:34
Right. Just because you see an established business or someone you admire online spending money on like big, fancy software, doesn’t mean you need to do the same thing to get started. You know, you can start off with free or less expensive versions, and then, you know, kind of upgrade as your business grows.

Laura 5:53
Right. As your sales and your revenue grow, then you can grow those expenses.

Nikki 5:57
Right. So there are definitely a few things, though, that are essential and worth spending money on, even if you are just getting started with your creative business.

Laura 6:06
Okay, so what are some of those, Nikki.

Nikki 6:08
Yaeah, so just to name a few, the first one is a computer. That goes without saying, but hopefully you’ve already got a good one by the time you’re starting your business. So we won’t get too much into that, but one of the best things that we spend money on, Laura and I have talked about this, is cloud storage, Dropbox or Google Drive, they both have free versions that you can use up to a certain amount of data. This is a bit off topic, but we recommend using cloud storage to back up all your data, so if you ever have a problem with your computer, you don’t lose anything, and you can get back up and running really quickly.

Laura 6:44
Yeah, and I want to talk about that for a second, because I had that happen to me. So I had an issue where my motherboard went bad on my computer, and I was freaking out a little bit, but I remembered I had Dropbox. I got a brand new computer sent to me. I logged on and ithe entire computer was backed up in like three minutes. It was the most amazing thing, because it was all in Dropbox as a backup. I didn’t even know that was all happening, you know, in the settings, and it just made everything seamless, and I didn’t have to stress out.

Nikki 7:17
Whew.

Laura 7:18
So yeah, totally worth the money.

Nikki 7:21
Yeah, and yeah. And you’ll find that if you do that and you work with huge graphic files, like most of us do, you’re going to really quickly outgrow the free plan, and it is well worth paying for more data storage,

Laura 7:33
Yeah, for sure. And I do pay for my Dropbox, but I use it for so many things.

Nikki 7:37
Yeah same, same. You’re also going to need to buy a domain name and website hosting, because, you know, we all need a website. And whether you use a self hosted platform like WordPress or use a service like Squarespace or Shopify, that hosting is part of it, you’re going to pay some fees no matter what you build your website with. And we’ll definitely get way more into detail on that when we release our website series. And you’re going to need some graphic software, whether you just need something like Photoshop to edit photos of your work, if you’re a fine artist or the full Adobe Creative Cloud, if you’re a graphic designer, like I am, but if you’re like a surface designer illustrator, you may be able to get by with several of the individual elements of the Creative Cloud, like maybe just Illustrator and Photoshop, and there are also less expensive options, like Affinity Designer for design and illustration and Affinity Photo for editing photos.

Laura 8:39
Yeah, even Canva does quite a bit now with creating digital assets, if you aren’t an expert at another software, like Photoshop. And we’ll probably dedicate an entire episode to Canva with all the cool things it does now, because it has AI attached, it can do all kinds of cool things for branding. So it’s definitely a cool tool, even videos. And I think you can post to social media with it, so lots of really cool things.

Nikki 9:00
Yeah, it’s it’s become a really, really strong tool.

Laura 9:04
Now another way to curb spend is to look for the free or lower cost tools to use with your businesses. Or, for example, having an email service for marketing yourself and collecting email addresses is really essential, but you can actually start that for free using ConvertKit or MailChimp, versus paying for something you know outright. There are also services like Flodesk that offer cheaper plans with unlimited caps as you grow so if you do grow exponentially, which we would all love to do, instead of having to ratchet up, where maybe you’re paying 100 $200 a month because of the number of subscribers you have. There’s an unlimited amount that you can have on flow desk without the price going up, which is really nice.

Nikki 9:50
Yeah, email is definitely important and can be a bit overwhelming, but you’re in luck. We’re gonna go into all about getting started with email marketing in our upcoming series.

Laura 10:01
And for physical businesses, you’ll need to spend money on art supplies, on shipping supplies, shipping fees, those types of things. But what are the things you don’t necessarily need to spend money on right away, Nikki?

Nikki 10:13
Well, despite wanting one desperately, I’d say I really don’t need to spend money on a brand new iPad with the new matte screen and the new Apple pencil with squeeze, barrel roll and haptic feedback when my existing one works perfectly fine.

Laura 10:29
Okay, I’m gonna admit (bad Laura), that I did upgrade my iPad last year and I bought the new pencil, but I don’t even know what haptic means.

Nikki 10:40
Well, Laura, it’s clearly wasted on you, and you should give it to me.

Laura 10:46
Okay, another thing you don’t need right away is a separate studio space from your home when, you know, a corner table in the living room will work just fine for you now, as your grow your sales.

Nikki 10:59
Or a virtual assistant. You don’t really need that when you’re getting started, you can use chat GPT instead.

Laura 11:05
Yes, which we will have a whole episode, I think, dedicated to chat GPT as well. Nikki, dare I say the words all the subscriptions?

Nikki 11:14
Oh, I don’t even want to talk about all the subscriptions I pay for.

Laura 11:20
I’m the worst at this. I used to pride myself on only having a handful of subscriptions, but it seems that they’ve ballooned out of control. I feel like most companies have gone from purchasing once to subscription services in recent years. Here’s just a few I pay for or have paid for in the past, for my business, Apple One, Dropbox, Canva, Adobe Creative Cloud, Later, which I know now could be replaced by like Adobe Express or Canva Pro, Wandering Aimfully, Skillshare, flourish and a virtual mail service. And then, you know, in my personal life, gosh, you know, all the streaming services, Nikki, like, you know, they all have their own platform now. It used to be like Hulu and Netflix, and now there’s Peacock and Stars, and I don’t know all the things, Disney, right?

Nikki 12:11
And you find yourself, there’s one show you really want to watch, and so you have to get a whole new network for it,

Laura 12:17
Yeah, yeah. And there’s only so many free trials you get, right? But even aside from that, I also have a ton of different courses, painting memberships. You know, there’s a workout thing called Class Pass I belong to – ask me how many times I’ve used that in the last few months. But anyway, we do tend to spend a lot of money on these subscription services and sometimes forget about them.

Nikki 12:42
Oh, yeah. And sometimes you think a subscription service is going to save you money when the exact opposite happens. For example, a lot of people who live like I do, in a bus or RV or whatever, get a Planet Fitness membership because they’re $25 to be able to use any of their locations all over the country, and you can go in and take a shower.

Laura 13:09
Oh, nice.

Nikki 13:10
Yeah, because some people don’t always have water. So I thought that’s great. It’s 25 bucks. I’m gonna, you know that’s nothing to be able to shower anywhere in the country. Well, I did the math, looking at it, and it turns out that my $25 a month cost me $62 per shower.

Laura 13:32
Per shower.

Nikki 13:33
Per shower, because I find that I’m not using it as much as I thought I would, because a I have a bathtub in my bus, so when my water actually works. I take a lot of baths, or if I’m, you know, at my sister’s house for three months, like I was this last summer, or, you know, visiting friends or whatever, if I’m at a campground that has a shower, so I find I didn’t use it as much. And I did the math and it was $62 per shower. So, I canceled that immediately, which, by the way, Planet Fitness, you don’t make it very easy to cancel. I had to send a certified letter.

Laura 14:06
Oh, wow.

Nikki 14:07
Well, it’s you either have to walk into your home Club, which I opened the membership in Florida, and I’m in New Mexico. So anyway, so I canceled it, and I can use truck stop showers, which are way bigger, nicer and cleaner, and you know, they’re $17 or $18 each instead of $62. So anyway, the moral of the story is, really consider all those subscriptions, what you what you’re really using and getting your money’s worth, or what you really could probably cancel.

Laura 14:42
OKay, so how do we get these subscriptions under control, Nikki?

Nikki 14:47
All right, Laura, there’s a great app that I’ve been using for years, and it’s called Rocket money. They have a free and a paid version.

Laura 14:54
Okay, I think I’ve seen them on social media before.

Nikki 14:57
Oh yeah, they’re advertising all over the place. So it started out as just an app to find your subscriptions and recurring expenses, and if you have the paid version, it will even cancel some of those subscriptions for you. I’ve definitely found accounts that I forgot I had, usually something that I signed up for a free trial and forgot to cancel. But actually, when I was looking at it, to talk about it here, I discovered that it now does a lot more. It now does all the expense tracking and categorization and budgeting that Monarch and Copilot do. So it looks like I have another decision to make.

Laura 15:35
Oh, wow.

Nikki 15:35
And, and we’ve created a PDF download for you that provides some alternative to regular, paid products that you might not have considered before. So you can access that as a download in today’s show notes.

Laura 15:47
Yeah, so check out the download for sure. It’s really hard though, to keep FOMO at bay – that fear of missing out. So Right? How do you avoid emotional spending, Nikki?

Nikki 15:59
Are you talking to me? Because I don’t avoid emotional spending.

Laura 16:04
Well, I’m the worst when it comes to online classes and memberships, because I want them all. And dare I speak about the dozens of paint tubes in my house that I bought because I saw someone else use that exact same color and decided that my artwork would look better if I owned and used the same one?

Nikki 16:24
Right? And there’s definitely that dopamine hit that you get when you make a purchase. It could be a book, an art supply, you know, anything, and then you’re already on to the next thing before you even used what you bought.

Laura 16:36
I feel so seen right now.

Nikki 16:38
Well, I was looking at you.

Laura 16:41
Well, I think we need to have a whole episode just about using the supplies that you already have.

Nikki 16:46
For sure.

Laura 16:48
I do have to say, though, the public library is awesome. So if you love books, the library has all kinds of resources, including downloadable, digital ebook and audiobook options. So Nikki, you can get all the dopamine hits you want for free.

Nikki 17:06
Well, there’s two things about that. One, I really much prefer reading physical books, but it’s also kind of hard to check out library books when you’re only in a town for two or three days. But honestly, I have enough books just on my bus to keep me busy for a couple years.

Laura 17:24
Or three or four?

Nikki 17:25
Yeah, probably.

Laura 17:28
So one of the things that I’ve been putting into practice lately to curb unnecessary spending is to wait at least three days after I see something that I really want to make a purchase. Especially if it’s not something, you know, I need, it’s just something that I want. And if I sleep on it a few times, I’m usually on to the next thing already, especially when it’s, you know, around sort of the big holiday spend times like the month of November, when everybody’s doing their Black Friday sales and all of that. And for big purchases, I always refer to my budget to figure out when I will have saved enough money to be able to make the purchase, versus trying to put it on a credit card and just pay for it later. And we’ll talk a bit more about credit card debt in a bit.

Nikki 18:13
Ugh, do we have to?

Laura 18:15
But all of this said, I always keep a little bit in my budget for fun things. So nothing huge, but I want to have the freedom to occasionally reward myself or do something that I really love and that looks different for each person. It’s kind of like if you’re on a super strict diet Nikki, and you never let yourself or give yourself a chance to eat anything outside of it, eventually you’re just going to blow the whole diet, right?

Nikki 18:40
Oh, I’ve never been there.

Laura 18:43
So it can happen the same way with money. But okay, back to money.

Nikki 18:49
Okay, so once we know what we’re spending money on, we’ve reviewed our expenses and we found some ways to lower them. What do we do if we have debt?

Laura 18:59
Well, the number one rule about debt is…

Nikki 19:02
The first rule about debt is, we don’t talk about debt. Oh, wait, that was Fight Club. So don’t get into debt.

Laura 19:13
Well, the main thing with debt is to understand what kind of interest rates you are carrying, and credit card debt tends to be the worst, so no one ever really reads the fine print, and often the APR rates, which stands for your annual percentage rate, can be over 20% and compound interest is an awesome thing when you’re investing and saving money, but it is a huge bummer when you owe that money to someone else. So it’s best to sort your credit card debt by your highest interest cards and pay those off first making more than your minimum payments and notifying your credit card company that you want any extra payment to go against your actual spend and not any interest percentage due. This will help you pay it off much faster. Now, other kinds of debt, Nikki, aren’t necessarily bad. For example, home debt for a mortgage is usually tax deductible, which can help reduce your income taxes,

Nikki 20:11
And if your car is being used for your business, you might be able to write off some of that as well.

Laura 20:16
Yeah. So finding ways to reduce your debt is important, especially when it comes to credit card debt. So let’s talk a little bit more about how we make money and how we can even increase that income. Because everybody would like to have a little bit more money in their bank account, right, Nikki?

Nikki 20:32
No, I would like to have a lot more money. Who wants just a little?

Laura 20:40
All right, the first helpful tool as part of your budget process is to list all of your various income streams and review the money you’ve made from each one in the last year. Now, some people may just have one income stream. Some people may have five of them, right, depending? We’ve always talked about how diversification can be a really helpful thing, but you’ll want to look at the effort that went into producing each product or service that you sold, versus the money that you got from it, of course, along with how much you enjoyed the process. Because you want to take that into account as well.

Nikki 21:16
Yeah, if you put 80% of your time and energy into something and find that it only gave you like 20% of your income. That might be a clue that you should be doing less of that thing and more of what you spent 20% of your time on that made 80% of your sales. Right?

Laura 21:32
Exactly. For example, I have a revenue stream in my business from Skillshare classes, and it’s great because I did a whole bunch of effort up front, but years later, I’m still able to make money from those classes with minimal effort now, and this means it was a great investment of my time, and I should probably look at making more of them. I can also take those courses, and I can sell them on my own Teachery website, so then I’m getting even more, you know, money for the effort that I put in. Another revenue stream I have is original paintings. Those take me a good bit of time to create, and I can only make so many in a year, right? Because it’s a physical product. I don’t sell them for huge sums of money. So I may want to look at increasing my pricing, but I can also leverage those collections of paintings for print on demand, or licensing deals, so I can earn more money from the effort that I put in to produce each piece of work. So how about you, Nikki.

Nikki 22:30
Well, so I haven’t done the the work of listing it out and figuring out the percentages, but I kind of know in a general way. So my biggest revenue stream currently is from my design business. And if I want to break that down further, number one is web design development and maintenance. That’s my biggest revenue stream for sure. Second is branding, and third is any other design work I do, like newsletters, brochures, ads. Okay, the next one is art and illustration commissions that would include the airport project that I did about a year and a half ago, that I’ve talked about 100 times, and various other things, including, like sticker designs, illustrated vehicle wraps, stuff like that. Those are super fun and probably my second biggest revenue stream. Next would be print on demand, art prints and products created for my digital art. That revenue stream has fluctuated a lot over the years, but 2025, is the year to build it back up and better than ever.

Laura 23:34
Well especially with your new pod shop that you’re creating.

Nikki 23:37
Exactly. And then there’s original physical artwork, the analog stuff, which I have to admit, I haven’t done a whole lot of since I moved into the bus. I’m still working on time and space for that, but I will definitely get back to it. And that includes original drawings, mixed media encaustic work and various other things, including jewelry, nice and like you, Laura, I want to pitch a lot of the digital and physical drawings for licensing. I’ve gotten one licensing deal with my state flowers and insects, but honestly, there hasn’t been much income from that. They’ve done better in my calendars and other pod products and the prints that I made of them myself before I sold my big, awesome Epson printer.

Laura 24:20
Do you miss your printer, Nikki?

Nikki 24:22
I do. But I’d have to lose like my toilet or my kitchen sink, if I wanted my printer in the bus.

Laura 24:34
I was gonna say it takes up a big, gargantuan chunk of space, right?

Nikki 24:37
It was big, yeah.

Laura 24:39
Okay. Well, another thing to consider is that money mindset comes into play here when we talk about making money. And I know pricing is a pretty tricky topic, but many artists tend to under price their work because they’re excited to see it sell, especially earlier in their career, right, right? They’re excited to see it sell, and it may not be. Reflecting its full worth. And as we adjust our money mindset to abundance and gain confidence in our own abilities, we start seeing the value that we bring to the table, and that income naturally increases. The same goes for asking for raises in your day job, or if you have one you know, or the salary that you know that you deserve during an interview process, I highly recommend taking a listen to the financial feminist podcast for tips, especially for women, on how to break the glass ceiling and find more financial security.

Nikki 25:31
I will definitely listen to that podcast. I kind of feel like my mindset is okay. It’s my impulse control that needs work.

Laura 25:39
Yeah, I think we we all need a little bit of impulse control work. Okay, Nikki, we talked about spending and making money. Let’s talk about saving money. So one of the first things most financial professionals will suggest is for you to give yourself an easily accessible emergency fund. Now you can start at three months, but ideally you’ll save six months worth of your expenses.

Nikki 26:07
That has never happened for me.

Laura 26:09
Now this is where that budget really comes in handy. You can take a look at what a half year spend looks like, and ensure that you’ve stowed away that much into a high interest savings account. This means, if you ever have a true emergency come into play, let’s say a car wreck, a medical issue, a leaky roof, which is something that just happened to me…

Nikki 26:30
…or the suspension brakes on your bus…

Laura 26:33
Anything that you don’t anticipate, you’ll have some funds to dip into to ensure that you can pay your important bills, and you won’t have to stress over how you’ll be able to keep a roof over your head.

Nikki 26:44
I have historically been terrible about budgeting and knowing how much to save to cover my monthly expenses.

Laura 26:50
Well, please don’t make the mistake I did, which was to open up a savings account in a big, big US Bank where my APR, again, stands for annual percentage rate was point 2%, which is basically nothing, right? So you can open up a high yield savings account with a reputable online bank, and you could earn around, I think, around 5% these days, which is a huge difference, right? .2 to 5% and personally, I moved my emergency savings from the big bank into a credit union savings account that makes so much more interest per year I was kicking myself that I didn’t do it sooner,

Nikki 27:28
For sure, and to make things easy on yourself, you can set up an auto draft so that money goes from your checking account or paycheck, if you get paid by a company, directly into your savings account so you don’t even see it before, before you’re saving,

Laura 27:45
You know it’s out of sight, out of mind, kind of thing. It’s a great way to grow your savings is you just have that auto draft set up. Now, of course, you need to ensure that your sales and revenues are and the money you’re bringing in the door is more than the money that’s going out. And that’s how you have savings, right? That you can you can save up. But to make things easy, I absolutely agree with the auto draft, and I have things set up that way myself. When you build systems like that, and it happens automatically, your savings can really quickly grow without you realizing it, even if you’re only contributing, you know, small amounts each week or month, and you can save for things beyond your emergency fund once you have that one stowed away.

Nikki 28:24
Yeah, I have to have automatic systems to trick myself into saving money and not even be aware of it. I have all kinds of things set up so I don’t even have to think about it. The first thing I did was set up a business checking account using Lili as my bank, which is a business only bank that has a great feature where anytime I make a deposit from any source, it takes a set percentage of that and puts it into a tax bucket. So if I owe anything, it’s right there for me.

Laura 28:54
Oh, that’s great.

Nikki 28:56
Until I set that up. I never set that money aside to pay taxes, although I really knew better.

Laura 29:02
So then you got to the end of the year, Nikki, and you were like, oh my goodness, I owe these taxes. That’s huge

Nikki 29:10
It is, it is, and the IRS will let you, you know, make payments on it, but of course, they’re going to charge you interest. Another thing that I love is an app called Oportun, which is designed to help you set specific savings goals that you can choose. For example, I have buckets for emergency savings, travel expenses and bus repairs. Cool. It’s really cool. The way it works, they learn your income and spending habits by, you know, just looking at what goes in and out, and it automatically takes out small amounts and puts it into the savings buckets that you’ve set up. And you don’t have to worry about it taking too much and causing you an overdraft because you can set things like the max amount it will take during a day or a week or whatever, the minimum amount you want to keep in your checking account. So that it, you know, if it, if you hit that number, it won’t take anything that day. And it has a low balance protection that you can set. So I have mine set that if my checking account goes below $1,000 it will transfer money from what I’ve been saving back into the checking account.

Laura 30:19
Oh, cool.

Nikki 30:19
It’s a great service that lets you save 1000s of dollars without even thinking about it, because it’s little, tiny increments that you don’t even notice. And I’ll put a link to opportune in the show notes.

Laura 30:29
And as long as you’ve done the work to reduce your costs and you’re not just taking everything from your savings back into your checking to pay for all those extra things you buy, you’ll be good. So why is it important to put money in savings instead of leaving it all in a checking account?

Nikki 30:47
Why is it, Laura?

Laura 30:49
It’s super important because of something called inflation. Now every year the value of money changes. So if you go to the supermarket, a gallon of milk is gonna cost, on average, about 3% more than it did last year. So for every dollar in your bank, the things you would buy with it go up to $1.03 so if you don’t try to grow your money in the bank by at least that percentage, you have less buying power for your milk.

Nikki 31:16
Laura, why are we using milk as an example? Shouldn’t we be using art supplies?

Laura 31:20
Okay fine, art supplies.

Nikki 31:22
Or iPads.

Laura 31:26
Over time, you’re going to be able to buy a lot less fancy black sketching pens, Nikki, if you don’t make some interest off of your savings.

Nikki 31:33
Ooh, I need those black pens.

Laura 31:35
Yes, and you’d have less bourbon to buy as well. I mean, very important things for you.

Nikki 31:41
We can’t have that.

Laura 31:43
Now, no conversation about saving money is complete without talking about how you can invest it. So once you have your emergency fund complete and any other things that you’re wanting to save for in the near future, you can begin investing for the long term. And I actually invest money, personally for my retirement in a traditional IRA, something called a Roth IRA and a 401 K with my current company. And we’re not going to go into all the details on this today. This is pretty high level, but one of the cool things about traditional IRAs and 401 KS is that they are tax deferred, so that means that you don’t have to pay income taxes on the money until you take it out down the road. So your money has a chance to grow pretty quickly. The other cool thing about 401 KS is that companies often match the contributions that you make. For example, they might match up to 4% of your annual income. So what do you think that means, Nikki?

Nikki 32:43
That means that if you’re not putting at least 4% of your paycheck in your 401K, you’re just throwing away free money.

Laura 32:51
Exactly. You could be stocking away at least 8% of your paycheck every month. And who wants to give away free money?

Nikki 32:58
Not me.

Laura 32:59
Now remember when we talked about how interest is not great for credit cards? Well, the exact opposite is true with investing. It helps you rapidly increase your savings over time. So let’s take a look at how this works in a real life example. Nikki, how much money do you want to invest per month in our example?

Nikki 33:20
Let’s say 150 a month is doable.

Laura 33:23
Okay, so let’s say you put $150 per month into an S&P stock market fund in your retirement account, averaging 8% annual return over time. Now let’s take a look at how much money that would give you when you retired at age 65 now we’re gonna reverse age you a bit and go back to when you were 21 years old.

Nikki 33:46
Oh I’d love to go back in time and start investing sooner, but man, do I not want to be 21 again.

Laura 33:55
Well, let’s say you started by contributing $150 per month back then. How much money do you think you’d retire with at 65 by never putting more than that amount in the account each month?

Nikki 34:07
Oh, I don’t know. 250,000?

Laura 34:11
You’d actually end up with $728,000.

Nikki 34:14
Wow.

Laura 34:15
That’s basically eight times the money that you put into your investment over that time period. Isn’t that crazy?

Nikki 34:22
Oh, man, let’s definitely get that DeLorean fired up and send me back.

Laura 34:27
Okay, now let’s pretend you didn’t start investing until you were 35 years old. So how much money do you think you would get when you retired in that scenario?

Nikki 34:37
I don’t know, something like 500 grand.

Laura 34:40
Well, you’d actually get $224,000 so about half what you guessed, wow, right? And you’d make around three times the money you put into your investment originally, a lot better than nothing, a lot better than nothing. Okay, let’s do one more scenario, and let’s pretend that you waited to invest that 100. $50 a month until you were 50 years old. How much money do you think you would get to retire with then?

Nikki 35:08
I don’t know. I give up. I clearly suck at this game.

Laura 35:12
You’d end up with around $52,000 which is around double the amount that you put in your original investment. So clearly this is the magic of compounding interest. The moral of the story is, start early, but it’s never too late to start investing, because even in that last scenario, you doubled your money. For sure, there’s a lot more interesting things about investing, like asset allocation and things like that. We’re not going to touch on any of those topics today.

Nikki 35:42
I don’t think we have the same definition of interesting.

Laura 35:47
This is so true. All right. Nikki, so the main thing is that money really shouldn’t be a taboo topic, especially within a household. It’s critical to discuss money with your family or partner on a regular basis.

Nikki 36:00
Okay, I’ll have a chat with my dog and cat about it later.

Laura 36:04
You know how that book, The Artist’s Way, has artist playdates? Yeah, well, I think artists should have financial playdates for their finances. It should be fun, not a huge chore. Put on nice music, bring out a box of chocolates and a glass of wine, or, in your case, a glass of bourbon. And just like any other part of your business, it’s healthy to review what’s working and maybe where you might want to make some tweaks.

Nikki 36:29
Well, finally, something I can say that I’ve been doing right? I’m not going to say it’s fun and I don’t need chocolate or bourbon to do it, although I’ll take chocolate and bourbon anytime, but that’s one habit that I actually did create for myself years ago, I just decided that every Monday I would sit down and categorize my expenses, and I’ve stuck to that for years.

Laura 36:51
Awesome. So to wrap this up, what are our key takeaways today, Nikki?

Nikki 36:56
Well, first, suck it up and figure out where you’re spending your money, and then cut out any unnecessary expenses or reduce them where you can, review your income streams and see what’s working and find ways to maximize your income in areas that drive lower effort. And if you don’t already have one, start a six month emergency fund through automatic deposits. What else, Laura?

Laura 37:24
Pay off any debt you have for things with the highest interest rates first, begin investing what you can towards retirement with a 401k or IRA, even if it’s just a small amount, have regular money play dates where you review and make tweaks as needed.

Nikki 37:41
We’re going to do all of those immediately. What you probably already do, all of them. I do some of them.

Laura 37:49
Awesome.

Nikki 37:50
All right, for links to all the resources we mentioned, and to get your free PDF download of alternatives to paid products and services, go to startistsociety.com/money

Laura 38:01
If you’ve enjoyed today’s episode, we’d love for you to leave us a five star rating and review reviews help us reach more Startists like you and keep us inspired to create new episodes.

Nikki 38:12
Thanks for listening, and we’ll see you next time. Rocket says hello.

Laura 38:17
Hi, Rocket!