In this insightful discussion, AJ Ayers, a personal finance expert specializing in creative finance management, shares crucial money tips for freelancers. From tackling retirement accounts to understanding tax obligations, he emphasizes the importance of early planning. AJ also delves into the emotional barriers surrounding financial literacy and urges creatives to embrace budgeting. Plus, he discusses unique challenges freelancers face, like homeownership misconceptions and aligning financial goals with lifestyle changes. This dialogue is a must-listen for anyone looking to take charge of their finances!
AJ Ayers emphasizes the necessity for freelancers to save a significant portion of their income for taxes to avoid unexpected liabilities.
Ayers challenges the conventional view of homeownership as a success metric for freelancers and highlights the importance of assessing financial priorities.
Deep dives
Transitioning to Financial Planning
AJ Ayers shares her journey from music journalism and editing to becoming a certified financial planner. Initially working in book publishing and then music journalism, she found herself needing guidance on money management after entering the tech industry. Realizing a gap in accessible financial advice aimed at creatives, she pursued education in finance and obtained multiple financial certifications, including CFP and enrolled agent designation. Ayers emphasizes the importance of understanding finances for freelancers and artists to succeed in their careers.
Challenges Faced by Freelancers
Freelancers often face the misconception that their transition to independent work will naturally succeed without proper planning. Ayers notes that many do not account for the added expenses and complexities of being a business owner, leading to financial struggles. She advises that establishing a financial cushion or emergency fund is crucial, as freelance work typically does not provide the security of a steady paycheck. Many creative professionals overlook the reality of managing their entire business lifecycle while simultaneously balancing their artistic endeavors.
Effective Tax Planning for Creatives
Freelancers can encounter unexpected tax challenges due to lack of withholding, resulting in significant end-of-year tax bills. Ayers strongly recommends saving a substantial percentage—up to 50%—of freelance income to prepare for taxes. She emphasizes that many freelancers underestimate their tax liabilities and advises on the importance of saving upfront for taxes rather than after the fact. Additionally, she highlights the necessity of understanding legal structures, like LLCs, to protect personal assets and minimize liabilities.
Rethinking Homeownership
Ayers challenges the traditional notion of homeownership as a benchmark of success, especially for freelancers who may struggle with variable income. She points out that renting can sometimes be more financially beneficial than owning a home, particularly in expensive markets. Understanding the true costs associated with owning a home is critical for freelancers, and alternative strategies like co-owning with a partner can provide solutions. Ultimately, she encourages freelancers to assess their values and lifestyle priorities when considering major financial commitments.
This week on Working Overtime, host Isaac Butler talks to AJ Ayers, a personal finance expert who specializes in helping creative people manage their money better. In the interview, AJ offers tips on everything from retirement accounts and taxes to homeownership and family planning.
Do you have questions or advice of your own about the creative process? Reach out at (304) 933-9675 or email us at working@slate.com.