7 Money management tips for Creative professionals

“Are you a creative professional who thinks money management is not my cup of tea?”or you feel being creative and productive is enough to secure your financial success?

All money is a matter of belief – Adam Smith

Everyone dreams about being wealthy and creative professionals are no exception to this. The reason for me targeting ‘creative professionals’ like Designers and Architects here is because a majority of them either ignore or pretend to ignore the ‘money angle’ and focus on the ‘creative angle’ alone.

We are not educated financially…

Right through our schooling days and during our professional courses (unless the subject is finance) we are not educated on critical aspects of money management. One typically starts thinking about money management only after an event called ‘Marriage’.

I got introduced to the topic of financial wisdom by reading a book that I stumbled upon years ago titled ‘Rich Dad Poor Dad’. Robert Kiyosaki nailed it by providing us the much-needed understanding of cash-flow quadrants. Professionals fall under one of the two quadrants of Employee or Self-employed / Small business.

Then what?

As it happens to most of us, it was a nice read for me and I did nothing about what I read.

Start early before being hit!

Only after a bad stretch of money troubles did I learn the lesson. I happened to sell old newspapers one day to buy breakfast; this is when it hit me hard.

First step is one of these two realizations around money management – either ‘I am not doing it’ or ‘I am not doing it right’. I am penning down my personal realizations around money in seven sections here.

Money management tips…

PART A – Money Psychology

1.   Money Mindset

I don’t mean to say have money on your mind all the time, however it is important to have a ‘healthy money mindset’. It is a promotion from the typical ‘middle class mindset’ of saying and feeling ‘money is not everything’ ‘money is not important’ etc. To develop a ‘healthy money mindset’ one needs to work on her/his belief system around money. In order to attract well-deserved wealth each of us need to develop a wealth mindset that is supportive and not negative.

It is my personal belief that we creative professionals perform better if our financial health is secured. You cannot be creative if you are not financially healthy also!

Your income can only grow to the extent that you do – T Harv Eker

There are many proven techniques to ‘reset’ your money mindset for beneficial results. I subjected myself to financial education, used vision boards, affirmations and observation over fairly long period to reset my money mindset.

2.   Money Vision

What are your financial goals? Do you have a money vision for yourself and your organisation?

Your money vision should be tied to a time line. ‘How much’ and ‘by when’ are two questions that we need to answer. It is also important to have a ‘compelling reason’ for why the volume of money you have as a goal is so important for you.

Bigger the why, easier the how – T Harv Eker

Your dreams will propel you towards realizing your financial goals. The psychological aspects of ‘Mindset’ and ‘Vision’ are what make up the foundation of your financial success. The rest are strategies around ‘making and managing’ your money.

PART B – Money Strategies

3.   Saving

Yes, the old fashioned word ‘saving’ and saving systematically is the starting point of money management strategies. Wise men have said ‘pay yourself first’. This simply means that a strategic fraction of your income should be set aside for investment and long-term use before expenses consume it. This varies from 10 to 20% of your gross income and is usually invested in instruments that give good returns.

Beware of little expenses; a small leak will sink a great ship – Benjamin Franklin

Keeping expenses in control and avoiding impulsive ‘binge shopping’ are important habits to develop. It is also important that you keep aside a 10% for pleasure and luxuries of life to keep the motivation going.

4.   Investing

Investing the fraction that is saved ensures that your money does not stagnate and lose value but grows instead. It is advisable to keep this component of ‘corpus’ at least 20% and increase it over a period. There are many opportunities to invest today like Mutual funds, Stocks, Real estate and in upcoming Businesses.

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1 – Warren Buffett

Mutual funds with a balance of equity and debt are an easiest option today.

Many portfolio management professionals offer these services at a small fraction of fee. Based on your ability to take risks, investment in stocks/shares, even options and futures can provide exceptional returns on the invested amount. This has to be done under expert guidance.

Term deposits fail to maintain the capital value of invested amount over the period of investment in today’s scenario, hence this is not the best investment option.

The key here is to invest the ‘corpus’ where it grows substantially over a period of time. It would be worth investing a portion of your earnings in educating yourself on financial freedom.

5.   Protecting capital

This is an important component of money management strategy. Not allowing the saved and invested ‘corpus’ to get consumed by big requirements or emergencies in life such as medical needs.

Insurance plays an important role here. Medical and life insurance of optimal value based on expert investment advice to protect the portfolio would ensure prevention of capital erosion.

6.   Credit Management

We tend to be ‘credit consumers’ at some point or the other. While home loans, hire purchase and EMI schemes provide us early gratification; it would be worth taking a calculated approach. Delayed gratification, disciplined timely repayment, as habits will go a long way in ensuring our financial success.

Drastic lifestyle changes in the event of increase in earning are better avoided. So borrow carefully.

7.   Creating residual income streams

Do you have only one working source of income?

For me this is a big realization. Spouse’s salary and interest on deposits do not qualify as secondary source of income! The advice I have received from rich people is to create sources of ‘residual’ or ‘passive’ income. Most of us working professionals or small business owners tend to risk it all by keeping a single source of income.

Financial freedom is available to those who learn about it and work for it – Robert Kiyosaki

Dependence on single source of income is primarily hereditary; we have grown up with our parents and grandparents being in the same boat of single income source. If you are like me, you do not have a family business history or rental income source.

Financial freedom is not an easy status to ask for. It requires commitment, planning, flawless execution and above all the tenacity to create additional streams of revenue.

Conclusion

The richest people in the world look for and build networks; everyone else looks for work – Robert Kiyosaki

The seven tips provided above are powerful aspects of money management and serve as tools for financial freedom when applied. The scope of each of them however is very vast and requires research, understanding to practical wisdom to implement. The intent of this blog is to provide a quick insight and reminder for us to take action in the required direction to financial freedom.

Article By: Sathish Desai, Principal Architect & Designer at CREO, Bengaluru

Disclaimer:

The content in this article is from the author’s personal experience and his learning from various resources. It is intended to inspire and help people. Author is open to feedback and comments. This may be shared for the benefit of students & professional communities.