Why understanding your finances is so important
Welcome to this week’s finance blog on 7 Money Management Tips for Photographers! As a photographer, mastering the financial aspects of your business is essential for long-term success and growth. Not only to make your business thrive financially- but to YOU the freedom and TIME to enjoy your life! Whether you’re just starting or looking to refine your financial strategies, these tips will help you navigate the complexities of managing your photography business finances effectively. Let’s dive in and discover how to optimize your earnings, handle taxes, and achieve financial stability in your photography journey.
Top money management tips for photographers
1. Understand your Cost of Doing Business (CODB)
Knowing your Cost of Doing Business (CODB) is crucial for making money as a photographer. It’s basically adding up all your business expenses like gear, insurance, marketing, software, travel, and other costs – to know your BASE expenses. Understanding your CODB gives you a clear picture of how much money you need to make to cover these expenses and still turn a profit. It also helps you set prices that reflect your worth and ensure you’re not shortchanging yourself.
To figure out your CODB:
- List all your business expenses, both fixed (like rent or insurance) and variable (like travel or ads).
- Add up these costs for the year.
- Divide the total by the number of projects you plan to do to know your average cost per project.
- Use this info to set prices that cover your costs and leave room for profit.
2. Separate your Business and Personal Finances
One common mistake that many photographers make is mixing their personal and business finances. This can lead to confusion, make it challenging to track business expenses accurately, and may even have legal and tax implications down the line! NO FUN for anyone!
To avoid this, it’s crucial to separate your business and personal finances right from the start. Here’s how you can do it effectively:
- Open a separate bank account and credit card specifically for your photography business transactions. This helps in keeping your business finances organized and makes it easier to track income and expenses.
- Use accounting software or tools to categorize and track all business-related transactions. This not only streamlines your financial record-keeping but also provides valuable insights into your business’s financial health.
- Avoid using your business account for personal expenses, and vice versa. Keep them distinct to maintain clarity and ensure compliance with tax regulations.
- Regularly reconcile your business accounts to ensure accuracy and identify any discrepancies or potential issues early on.
I personally use Bluevine for my checking account, and a Chase Business Ink credit card.
3. Dive into the Profit First model
One effective method to manage your finances is the Profit First model, which focuses on prioritizing profit allocation from your revenue. In this guide, we’ll explore how Profit First applies to photographers, a model workflow, and my recommended business banks for maximizing your earnings.
Profit First is a cash flow management system designed to ensure that you’re consistently profitable. The core principle is simple: allocate a percentage of your revenue to profit first, before covering expenses. This approach helps photographers avoid the common trap of spending everything they earn and struggling to generate meaningful profits.
Check out my post on Profit First for Photographers
4. Create an Automated Money System
Creating an automated money system is like having a personal assistant for your finances as a photographer. It’s all about using tools and tricks to make tasks like invoicing, tracking expenses, and saving money easier. Here’s how you can set up your own automated money system:
- Use accounting software or app to handle your payments and invoices. This not only saves time but also ensures your clients pay on time without you having to chase them.
- Use apps that sync with your bank and credit cards to automatically categorize your expenses. This way, you can easily see where your money is going and manage your finances more effectively.
- Set up automatic transfers from your business account to a savings account. You can allocate funds for taxes, emergencies, or specific goals without having to remember to do it manually every time.
- Consider automating contributions to retirement accounts or investment portfolios. This helps you build wealth over time without constantly monitoring or managing your investments.
- Get a legit CRM to help automate your business! I use Dubsado and it is LIFE!
By automating these money tasks, you can free up your time to focus on what you love—capturing stunning photos—while knowing that your finances are in good hands.
5. Plan for Taxes (and hire a CPA)
Most creatives CRINGE at the mention of the dreaded taxes, it’s crucial to plan for them proactively. And once you get a clear picture of how to allocate your money well and prepare in advance, it gets waaayyy less scary! These are the money management tips for photographers that we like to push off til the end of the year – but don’t skip these!
- Track Your Income and Expenses: Keep detailed records of your income and expenses throughout the year. This includes invoices, receipts, and any financial documentation related to your photography business. Having organized records makes tax preparation sooo much smoother.
- Understand Tax Deductions: Familiarize yourself with tax deductions specific to photographers. Deductions like equipment purchases, travel expenses for photo shoots, marketing and advertising costs, home office deductions if applicable, and more. Knowing what you can deduct can significantly reduce that tax bill!
- Estimate and Set Aside Taxes: Use your income and expense records to estimate your tax liability for the year. Set aside a portion of your income regularly to cover taxes, so you’re not caught off guard when tax time arrives – literally THE WORST financial hit if you haven’t been saving!
- Consult with a CPA: Hiring a tax pro aka a Certified Public Accountant (CPA)!! And consider hiring someone who specializes in working with photographers or small businesses! They can provide valuable tax planning advice, help maximize your deductions, ensure compliance with tax laws, and save you time and stress during tax season.
6. Have Monthly Money Dates
Schedule regular “money dates” with yourself and/or your business partner/spouse! Review your finances and make strategic decisions consistently so you don’t miss anything. Here’s how to make the most of these monthly money dates:
- Review Income and Expenses: Look at your income sources and expenses for the past month. Identify any trends, unexpected expenses, or areas where you can cut costs.
- Set Financial Goals: Use these meetings to set short-term and long-term financial goals for your photography business. Whether it’s saving for new equipment, investing in marketing campaigns, or planning for taxes, having clear goals helps guide your financial decisions.
- Track Progress: Monitor your progress towards your financial goals. Are you on track? Do you need to adjust your strategies or budgets? Regularly tracking your progress keeps you accountable and motivated.
Having monthly money dates ensures that you stay proactive and informed about your finances, allowing you to make informed decisions that contribute to the financial health and success of your photography business. Don’t let yourself get too far behind or you’ll be pulling out your hair going through hundreds of transactions when tax time comes around.
7. Create an Emergency Fund
Having an emergency fund is like having a financial safety net for you and your photography business. It’s a pool of money set aside specifically to cover unexpected expenses or financial challenges. Unexpected expenses can seriously arise at any time. And you want to be able to automatically have the funds to cover it without going into debt! Whether it’s equipment repairs, a sudden drop in bookings, or personal emergencies that affect your ability to work. An emergency fund provides financial stability during tough times, preventing you from relying on credit cards or loans.
Here’s how to create an emergency fund:
- Determine how much you need in your emergency fund by considering your monthly expenses, potential business expenses (like equipment repairs or replacements), and personal financial needs (like rent or mortgage payments). Reference CODB!
- If you’re just starting, aim to save at least one month’s worth of expenses as your initial emergency fund. Gradually increase this amount until you reach your target based on your calculated needs.
- Treat your emergency fund like a non-negotiable expense. Set aside a portion of your income each month specifically for your emergency fund. (Automated transfers help BIG TIME here!)
- Store your emergency fund in a separate account that’s easily accessible in case of emergencies. However, keep it separate from your regular business or personal accounts to avoid using it for non-emergency purposes. A HYSA can be a great option!
- If you ever need to dip into your emergency fund, make it a priority to replenish it as soon as possible. This ensures that you’re always prepared for unexpected financial challenges.
Shift your Money Mindset
Money Management Tips for Photographers mean nothing when you’re not ready to shift your mindset on money. You can have allll the finance education in the world thrown at ya but if you’re not willing to do the inner work – you’re limiting your financial future! As creative and small business owners it can be difficult to OWN your work and charge your worth. Especially if you don’t have a supportive community. BUT if you do the work, dive into WHY, and then find like-minded entrepreneurs to be ON YOUR SIDE – oof. Friend, you have the potential to build a photography business that not only PROFITS but give you the freedom to live in abundance.
Elopement Photographers Education Community
Looking for more money management tips for photographers like yourself?? Be sure and check out my elopement photography education resources and be on the lookout for my next available mastermind!
