How to Manage a Lump Sum Payment as a Creative - #74

Treyton DeVore

March 11, 2023

Welcome to The Loaf - making money & business more approachable for self-employed creatives & freelancers

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Money: What To Do With a Big Lump Sum Payment (as a Creative) [article]

Whether you signed a brand deal or got an advance, dealing with a big chunk of money can be stressful.

A few steps to take, no matter the situation:

Cover your COGS

COGS stands for "cost of goods sold". For a traditional business, like a clothing company, this would be the cost of material & production.

For your creative business, this may be contractor costs to fulfill the project requests or production costs to finish the film.

Set aside money for taxes

Since you don't have an employer to withhold taxes for you, you need to do this yourself.

Your official tax rate will depend on a lot of things—such as your marital status, number of kids, type of business, and more—but the important thing to know is that you have to set aside some portion of the funds for taxes.

My general recommendation is to set aside 25-30% of what you get paid right away and if it ends up being too much, you can easily transfer it back.

Consider your growth goals

Mr. Beast is the most prolific YouTuber in history. The biggest reason? He invests nearly every dollar back into his business.

If you have plans to keep growing and expanding your business, you'd want to reinvest some of your earnings instead of taking everything as personal pay.

Put yourself on payroll

The best way to avoid blowing through newly acquired money is to limit your access to it.

Instead of taking the leftover money and putting it in your checking account, set it aside in a different account and create a regular automation that "pays you" just like a salary. This can help the lump sum feel less overwhelming and lets you maintain a normal cash flow.

More details & examples in the full post:

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🗓 this week

Friendly money & business reminders for self-employed creatives

✅ Consider making an investment into your business

Why? Whether you're freelancing, selling goods, creating content, or making music, there are several areas you could put dollars behind and see a positive return on investment (ROI)

• For example, what if learning a new skill as a freelancer meant you could charge an extra $500 per project and the course to learn it was $1,000? It may feel expensive on the surface but when you look at it from an investment perspective, the path to getting a return is obvious - sell the skill that you just chose to learn more than twice.

• Another example: it's hard to get organic reach on social media without an existing audience. By paying to promote your content—such as sponsoring a newsletter like Josh Spector's—you can get a nice boost in a shorter amount of time. I wouldn't do this for everything, but paid promotion behind good content or products works - you just have to figure out what works for you and your offer.