by Bill Cramer, Wonderful Machine

We’ve talked a lot about how to make money with photography, but saving it is a different matter altogether. It’s something that presents a special challenge for many photographers who don’t collect a regular paycheck or have employer sponsored retirement plans. And it’s made even tougher when there’s always some new piece of equipment, software or marketing directory demanding your hard-earned cash. But saving is essential for anyone interested in owning a home, sending their kids to college or retiring some day.

Saving is something that I’ve been conscious of since I was a little kid watching Wall Street Week with my dad on Friday nights. I can remember learning that there were some people in the world who had saved enough money that they didn’t need to work anymore. They had so much money that they could live off of just the interest and dividends from their investments. I remember thinking that that was a great idea and I was going to try to do that. Though I’ve never made a ton of money as a photographer, I’ve always been able to save; even when I was shooting fifty dollar assignments for the AP. Here are some basic tips that can help you get started:

1) Live within your means. Regardless of how much money you earn, you have to spend less than you make. For some people, that might mean living with their parents or buying a coffee maker instead of going to Starbucks. Being frugal is different from being cheap. Cheap is stiffing the waitress. Frugal is skipping dessert so you can tip the waitress. (Actually frugal is staying at home and cooking for yourself!)

2) Only borrow money to buy things that appreciate in value or generate revenue (like school loans, photographic equipment and home mortgages). Borrowing money to go on vacation is foolish because you’ll be paying for it long after your tan has faded. Borrowing money to buy a car is questionable. It’s a depreciating asset, but if you need it to get to your job, it may be worth it. Just don’t let the “free money” seduce you into buying a more extravagant ride than you can afford.

3) Pay off your credit card bills in full. The easy money of a credit card can be seductive, but it’s a Faustian bargain. It’s like buying all your groceries at 7-eleven. You’ll pay a steep premium for that convenience. Better to borrow a lump sum at a reasonable interest rate that you pay off each month. Even if you borrow money from a relative, write up an agreement with a payback plan and stick to it.

4) Reconcile your credit card and checkbook every month. (See how at the bottom of the page.) The process will not only keep you from overdrawing your accounts, but minding every penny you earn and spend is the first step towards saving. Keep your ATM and credit card receipts and make sure they match up with your statements. Those slips of paper will serve as a reminder to make smart choices all month long. Don’t pay ATM fees. Open an account at a local bank and use their free ATM when you need cash.

5) Be satisfied saving small amounts of money at first. Every journey begins with a single step. Develop a habit of saving each month and then gradually increase it as your income grows. Once you get into the habit, you’ll get as much of a thrill from saving as you do from spending.

6) Learn how compound interest works. Some claim that Albert Einstein said that “compound interest is the most powerful force in the universe.” In the short-term, interest may seem like a very small reward for your efforts. But over decades, it’s the interest on the interest that allows your money to grow exponentially. That’s why they say, “the rich get richer and the poor get poorer.” Over an lifetime of saving, the interest that builds up can be double or triple the principle you’ve saved.

7) Charge as much as possible for your photography. There will certainly be times when you’ll do favors for friends and relatives or for a charitable cause. But everyone else should pay top dollar. Your pricing should be dynamic. Evaluate each assignment and stock sale individually and price it to maximize your income. Learn how licensing works, how to write a licensing agreement and how to charge for it. Share pricing information with other photographers. Ignorance drives prices down, knowledge drives them up.

8) Pay as only much as necessary for all of your business expenses. It’s true that you have to spend money to make money, but you have to do it wisely. Be realistic about what kind of return on investment you’re going to get with every person you hire and each purchase you make.

9) Understand the difference between your business and personal money. For a sole proprietor, it may be overkill to have separate credit cards and bank accounts for your personal and business transactions. The important thing is to keep good records of which is which for tax purposes. Don’t mentally spend money as you make it. A 1000.00 assignment fee shrinks dramatically once you pay for your overhead and taxes.

10) Even the 99% must embrace capitalism. The alternative is even worse.

11) Saving isn’t just green in dollars, it’s green in terms of sustainability too. It’s true that spending helps the economy in the short term. But spending is an economic dead end (both individually and collectively) without a proportional amount of savings to go along with it. (Savings provides capital for individuals to buy homes and companies to grow.)

Enough platitudes. Here’s what you actually have to do. Start by finding a no-fee (or very low fee) checking account at a bank near you. (Don’t expect that account to pay any interest.) Once you build up enough of a cushion where you can comfortably pay your bills each month, open an interest-bearing money market account (Vanguard is a good place to do that). Let’s say you decide to keep $5000 in your checking account. Each month, when you balance your checkbook, transfer any excess money to your money market account. Maybe you decide to keep $20,000 in your money market account as a reserve. Every quarter, as that money builds up, transfer it to a long-term (more than 5 years), low-cost index fund that invests in shares of lots of big companies (I recommend the Vanguard 500 Index Fund or Vanguard Total Stock Market Index Fund). That’s where you’ll get (on average) good appreciation in exchange for moderate risk. When you get close to a big purchase that you’re saving for, stop moving money into your long-term account and let it build up in your money market account.

You will want to set up two long-term accounts – one for retirement and one for other long-term goals like buying a home or college for your kids. The advantage of a retirement account like a Simple IRA or SEP IRA is that you don’t have to pay income tax on the money that you put in or on the resulting dividends or capital gains until you start withdrawing that money many years down the line. Consequently, it will grow much faster.

You might wonder how much money you need in order to retire comfortably. Certainly, it depends on the kind of lifestyle you’d like to grow accustomed to. On one hand, the cost of living in retirement can be less because you’ll probably have fewer mouths to feed (with any luck, your kids will be self-sufficient by then) and your house will be paid off and you won’t have to save for retirement anymore because you’re retired. But some things will cost more. Chances are your health will only get worse, which will be expensive. And if you’re lucky enough to stay healthy, you might want to travel and enjoy yourself a little after all of those years of hard work – and that ain’t cheap. So I say it’s a wash. Plan on giving yourself the income that you have towards the end of your career.

At the moment, a modestly middle-class life in America for a family of four will run you about $100k/year before taxes. In order to make that off of interest and dividends, you’ll need 17 times that or $1.7 million. Over the past 100 years, the stock market has provided the best return on investment compared to alternatives like bonds, commodities (like gold, silver, pork bellies) or real estate. Of course unlike putting your money in the bank (or in your mattress), any investment can lose money. But the longer your horizon time, the safer the bet is that you’ll be ahead of the game when it’s time to collect. The U.S. stock market has returned an average of 9% over the past 100 years. Inflation has been on average 3% over that period. So adjusting for inflation, you might reasonably expect to get a 6% appreciation on your money in the long run. (The numbers below allow you to see the appreciation in “today’s dollars,” as though there was no inflation to consider.)

So here’s one way you could map out your route to getting that $1.7 mil:

Of course, you’ll see that even after saving for more than 40 years, you could still come up a little short. I’m assuming that since you’re a sensible person and you’ve saved all along, your parents were probably sensible people too and that they left you a little something in their will (in this case, we’re hoping for $325k). And if not, maybe Social Security will not yet be bankrupt and help out a little. Saving for retirement isn’t easy. But with a little planning and discipline, it’s an attainable goal for most photographers.

How to reconcile your checkbook:

As you make each deposit and write each check, you’ll want to write an entry in your ledger to keep track. At the end of each month, your bank will send you a statement detailing all of the transactions that they’ve recorded. But since the checks you write aren’t necessarily cashed in the order that you write them and since many of them won’t show up on your new statement, you need to reconcile the bank’s records with yours to make sure every transaction eventually turns out the way it should.

If you use Quicken or some other personal bookkeeping application, it will prompt you to balance your account and guide you through the process. If you keep track on paper, you’ll have to reconcile your account manually, but it’s really easy. All you have to do is check off each transaction as it appears on your statement, then check off the corresponding transaction on your ledger. When you get through the whole bank statement, write out this equation, filling in the numbers for the following items:

ending statement balance
+ outstanding deposits
– outstanding withdrawals
– outstanding checks
= ending checkbook balance

If those items add up correctly, you’ve successfully reconciled (some call it “balanced”) your checkbook. If it doesn’t add up, you’ve either made an arithmetic error or you’ve omitted or incorrectly recorded a transaction. On rare occasion I’ve even found errors in my bank’s records. Go through your entries and rework the math until it comes out right. (One common mistake I used to make is putting a deposit in the withdrawal column.) Reconciling your bank account is worth the time and effort because it allows you to know exactly where your money is and it allows you to be decisive about moving your money around to where it needs to go.

How to reconcile your credit card statement:

The credit card statement is a little easier to reconcile. You don’t need to keep your own ledger the way you do with your checking account. You just need to keep all of your credit card slips and then match them up with the list of charges when you get your statement.

This post was created by the fine folks at Wonderful Machine.

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  1. I would be doing all of this is I could get more clients and not pay $1489 for our family health insurance.

  2. ha. the title is an oxymoron.

    • Yeah, “wealthy photographer” is not something you often hear. “Money Management for Photographers” might be a more appropriate title.

  3. The good news is that it’s still possible to make a small fortune in photography.

    Simply start with a large fortune…

  4. The best wealth management advice photographers will ever receive is “go to medical school or get a plumbers license instead”.

  5. To live within one’s means, and have a budget depends upon a predictable revenue stream. For photographers, I don’t believe this happens very often if at all. The photographers I’ve known who have accumulated wealth did so by buying their NYC studios when prices were low and selling high years later, becoming “instant” millionaires in the process.

    Other photographers made money selling products or services such as mailing lists and various promotional ventures to other photographers. As Deirdre stated above, the current cost of health insurance is crippling.

    It’s too bad there isn’t some sort of photographer retirement fund similar to SAG/AFTRA. The 100K figure above translates into needing at least one 3K job per week to net 100K which will then be subject to over 15 percent for social security taxes, then deduct health insurance and your at 70K. I have photographer friends who have had incredible years, and who believed they wouldn’t end. But the biz is cyclical and always changing, and what the tide of good fortune washes in, it also washes away, and those some photographer friends are currently singing the blues. Even famous Annie went bankrupt. Too bad she didn’t have this article in 1980 :)

    Photographers often have to spend significant amounts of money on promotion that may or may not lead to work, and if it doesn’t result in work, can represent a 10K debt going forward.

    Bill’s a sharp guy, and I agree with his advice, and also think the Vanguard 500 is a good place to park some retirement money.

    When I entered the field, the common advice to aspiring photographers was to have enough money to last 6 months to a year. My point is that you can have your finances in good order, and have some regular clients, and then have your bank account wiped out by a three month or longer slow spell. Your best year can be followed without warning by your worst year.

    • Thank you for mentioning my post Dan. We are on a small business family plan since my husband is a freelancer as well but as a digital editor for tv. Like I mentioned if it weren’t for that bill every single month, then we would be “okay”.

      • I hear you! I just got back from Istanbul. One day while walking in the Grand Bazaar, a store worker engaged me in conversation and said he thought I was a Republican. I had to laugh as I told him I was a Democrat and the furthest thing from a Republican imaginable, and that one of my reasons for this was the health care issue. Now I’m a photographer and can’t speak with any real authority on politics and stuff. What do I know? In Turkey, the government provides health care. However they’re trying to get people to buy their own coverage and offering greater retirement benefits if they do. In essence they’re moving money from one pocket to another. While there a family member needed antibiotics. I was able to go to the pharmacy and purchase them for under $10. If you want to go to the hospital you can call or go online to make an appointment. My point is it would be nice if our government could help small businesses like photographers.

  6. Good ideas here, other than this:

    Share pricing information with other photographers. Ignorance drives prices down, knowledge drives them up.

    Let’s not pretend that all photographers are the same or deliver similar value…

    For a sole proprietor, it may be overkill to have separate credit cards and bank accounts for your personal and business transactions. The important thing is to keep good records of which is which for tax purposes.

    Ignore this advice. Ignore it especially if you think that you will ever get audited by the IRS. What Bill is recommending is called “commingling”, and while it happens, it should not be encouraged, even for a sole proprietor.

    You are in business. Get a proper business bank account. Thank me when the IRS calls for an audit.

    • Agree with most of what you’ve said Gordon, but I’ll point out that my accountant has advised that co-mingling business and personal checking accounts is a great way to throw a red flag the IRS’s way to get audited. You may not need a separate credit card, but you absolutely need a separate checking account.

      • Doug – I think that we are agreeing here.

        I’m saying that Bill’s advice is good other than the idea of not have a business account. I think that you agree.

        • Oops, looks like I misread, sorry! Yes, we agree.

    • You only have to worry about an IRS audit if you’re hiding revenue or fabricating expenses. It’s true that once you’re firmly established, it will make sense to structure your business more formally. I’m just suggesting that young photographers learn to walk before they try to run. My own experience has shown me the value of keeping things simple.

      • Bill, I appreciate your input and everything you have done, but I think you are doing young photographers a tremendous disservice here.

        Auditors have discretion, and the intensity of an audit depends on how proper your books look to the auditor.

        First impressions matter. Commingling funds is like showing up to a blind date with a big chocolate stain on your shirt. It is one of the best ways to say to an auditor, “Go over every single transaction, because I don’t know what I’m doing”.

        If you want to be doing this as a business, I bet that the first thing out of the mout of 95% of accountants will be “get a separate business account”.

        Photographers – once you get serious, get a business bank account. Do NOT commingle funds.

        Having a separate business bank account takes a few hours of work. It is a one-time investment, and it helps you understand the mechanics of running a business. The process is useful, and the result is useful.

  7. With people not really writing personal checks anymore, and with web access to accounts, the “balancing” and a host of other things is done for you. You can even integrate Quicken with accounts on-line (or so I’ve heard–don’t do it myself). So, while the principals may be sound, the actual methods struck me as a little out of date.

    • It’s true that Quicken can assist you with that process (as I’ve noted). But you still have to make sure that the bank’s list of transactions (and amounts) matches up with yours (I admit, this is a subtle point). Even more important, that reconciliation process is an opportunity to evaluate your revenue and expenses on a regular basis so you can make appropriate adjustments.

  8. So, where is that article on how to earn a living at photography?

  9. I’ve always liked using tax season preparation as
    the basis for preparing a more accurate CODB for
    current year. Your article has given me a much bigger pov.

    Item #7 stands out for two reasons:

    1) The potential for re-licensing intellectual property is what makes
    photography so lucrative. Especially now a days when there is no
    additional cost to make dupes of the original and where the potential
    usage for images is on more than just print.

    2) It’s true that a lack of knowledge drives prices down.
    When a photographer decides to simply match what others in any market
    are charging, they are making longterm decision based on incomplete knowledge
    and the assumption about how much their CODB is.

    Myself and number of other professional photographers in AK would
    love to take you ASMP: Real World Pricing & Negotiating workshop.
    Thanks for the timely article Bill.

  10. where are you finding a savings account that is making 6% interest? That would be great!

    • Good question–average savings interest rates are under 1%.

      • The 6% interest rate (adjusted for inflation) comes from investing in the stock market, not a savings account:

        “The U.S. stock market has returned an average of 9% over the past 100 years. Inflation has been on average 3% over that period. So adjusting for inflation, you might reasonably expect to get a 6% appreciation on your money in the long run.”

        • Should have read the entire article before commenting (I read the part about checking and money market accounts, but not much farther).

          • Sorry fellas, I should have labeled that column “appreciation” instead of “interest.”

  11. Great article, I basically have given this speech to every assistant that has ever worked for me over the last 30 some years…some have even followed the advice.
    Now I’ll just send them this link. This is a wonderful public service to shooters everywhere. Thanks!

    Steve Niedorf

  12. Self employed photographers should consider an i401k for their retirement. They come with benefits such as simpler administration and higher yearly contribution limits (very useful if you need to play catchup after the recession).

    I like Vanguard’s Target Retirement funds. They shift over time from mostly stocks to safer ratios of bonds as one ages.

    For general investing, Scott Burns “Couch Potato Portfolio” is a simple no BS way to gather decent interest without having to constantly monitor it. It’s just two index funds – a total stock market fund, and an inflation protected treasury bond index.

  13. Even the 99%must embrace capitalism.
    To support the game one has to buy their way in .
    Still trying to get my head around that one.

  14. Social Security was never meant to be total retirement but a back up and supplement for the elderly so destitute elderly would be a thing of the past. It has pretty much worked! Also, despite the hyperbole, it is sound and WILL be around — even for the children of today. Yes, it needs tweaking again and the tweaks of not too long ago did save it.
    The 401k and other plans like it (403b for college staff and faculty, etc.) were also not meant to replace pensions but supplement your pensions. However, companies began to eliminate pensions in the 1990s onward and a pension does not exist for independent contractors.
    An IRA was also meant as a supplement.
    Independent workers need to save *something* each month. The younger and sooner you do SOME saving at all, the better you will be. If you are 18 or younger, save $10 a month or more if you can. You won’t notice it if you make it automatic into an IRA! This is key. When you have a job that matches 401k savings, do it!! AS much as you can save. By your 30s you should be saving at least 15% of your income. Some say 11% and some say 20%. I say 15-20% for sure. If you start early with saving to retire, when you reach your 50s, the pain will be far less as you will just keep chugging away with the 15-20.
    Also, have 6 months to a year saved in CASH (savings, MM, or Bonds) if you loose your job. Which, all of us will experience at least ONCE in our careers!
    Keep in mind too that, most people retire by 61! So while you may say you will never stop or will go to 68 or 70, the reality is, we get old and tired and worn out! Save your money while you are young!

  15. This is excellent straight forward advice, thank-you Bill.
    I would only add that if the photographer’s spouse cannot provide health insurance for the family, the photographer should try for a part time job (related to photography if possible) that will pay this important/expensive benefit. Multiple streams of income are also a good idea overall.

  16. I’m thinking of starting a photo insurance business. The kind where one is covered in the event of needing photography services but can’t afford the cost at the present time. Think about it, we could as an industry articificailly inflate our prices by having the insurance subsidze dayrates. You never know when as a client might need that big photo shoot and the premiums you have paid, for years hopefully, will get one to the finish line.
    Just thinking.

  17. ur..great advice..but what about those of us who are not 23 and are in our mid forties reading this for the first time….

    • it’s never too late to start good habits.

  18. Excellent advice. These are the basics, which I’ve used myself for the last 25 years. It’s really common sense, but good to hear again, it reminds me that I got something right!

  19. “Charge as much as possible for your photography. ”
    This would be practical advice if there weren’t dozens bottomfeeders under bidding every job….

  20. First off, we need more articles like this. I can easily see how a young photographer wouldn’t be able to envision saving real money, or how a photographer who didn’t put the requisite thousands of hours into both their craft and their business skills would also see this as impractical advice, but I have done very well in this business, own my home, and have good savings.

    I would respectfully object to the notion that read debt is ever a good idea (mortgages aren’t real debt as long as one has real equity in the investment). If you don’t have the cash for the equipment you want to purchase, you likely don’t really need to buy it, and that debt can really saddle you down as you move forward.

    My take on credit cards is that they are only appropriate for people with strong financial discipline who are are always able to pay them in full.

    I would also add that living within one’s means usually means living below one’s means. That allows you save, and puts one in a position to best ride the ups and downs of our business and still be able to save. Most of us spend very foolishly and buy what we really can’t afford (there is a lot that we think we “need,” but really simply “want”).

    This is what has worked for me over the last decades, and put me in a position to be on a great path to retirement. In response to mid-40’s Antonio, half of your career is potentially still ahead of you, and our best years, generally speaking, are in the upcoming decade. I’m sure this advice isn’t really new to you; only presented in a different form. The time to start saving is always the same, right now. Tomorrow never gets here. Set aside 15% and put it into retirement savings, at a bare minimum.

    Karen, it has, ironically, become easier to deal with the bottom feeders because real camera talent is becoming less common that it was several years ago. The beginning of success is mastery of one’s craft (this is not personal to you, I have not seen your work).

    My two cents.

  21. Evening.
    After first reading the very reasonable, though very likely to be widely ignored advice article, I then proceeded to read the various comments. Being a commercial ad shooter since the days of Jim Morrison and Bobby Kennedy I have to think that we are all doomed if we simply perceive ourselves as “photographers”. Our former role models are extinct. Photographers are supposed to be artists and creative and flighty and all. So how are we supposed to successfully work for entities that see us mostly as petty and disorganized vendors? To me that’s the challenge. Photoshop and digital capture and now iPhones and Instagram are all secondary to this point.
    How do we (continue to) evolve as successful business peeps in the world we now live in? Wonderful Machine and A Photo Editor have both found a current niche so good for them. Black Rapid and RRS are another route for shooters. But realistically how many of use want to be vendors to our first love? Just a bunch of questions. No real answers.
    So what do you all think of your future?

  22. Everything about frugality, managing credit, living within your means and spending smartly is right on target.
    But the savings rate of 6% is total BS. This is the huckster pitch I’ve heard from every “wealth manager” I’ve ever talked to. I’ve been saving since started my business 28 years ago. I’ve been through three devastating stock crashes. 6% on anything is a pipe dream. Of course you should save despite the pitiful return on interest and the thieves on wall street. Cash is good. But if you can possibly afford it, buy your studio/house/condo. That will appreciate over the long term, you have a place to live and work and the tax advantages are great. But 6% return puuhhhlease!

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