Cash Flow is the way we use our money to handle life. It is not exactly something that we are usually taught in school, but it absolutely should be. For artists, a smart cashflow can bring you into a position that enables you to create more, and live the life you want. The points that cover here are valid for everyone, but I use examples from the dance world.
If you want to read up on the matter in depth: Rich Dad, Poor Dad and Cashflow Quadrant from Robert Kyosaki cover those topics in easily understandable language. There is better literature if you are already in the matter but those are a perfect starting point if you want to dig deeper.
The predominant model – the Rat Race cash flow
The majority of people work a job and directly spend the money to cover their fixed cost and additional expenses. It is what is taught in schools. Get a good education, get a good job.
The issue with this model is that at the moment, you are not able to work (or don’t want to), you have no way of covering your costs. Smart fellas have a few months of savings, but it does not change the fact that you depend on your work.
Some folks consider this to be the modern form of slavery. But that is a debate for another day.
The smart cashflow that can lead to financial independence
The smarter set-up is to put your work into creating assets that make you money and pay your costs from the income produced by those assets. Assets can be anything that generates income without the need to constantly spend your time on them. Probably the most famous asset, which is also easy to understand, would be real estate. You can rent it out and get money from it. As long as you earn more from the rent than it costs you to maintain the facility, you have a positive cash flow that does not depend on yourself. Other traditional assets would be a company you own or stocks (that come with some risk).
But we don’t have the money to buy a house! Me neither. Luckily, there are many cheaper assets that you can start working on right now, based on your dance skills.
Examples of this would be online education based on recorded videos instead of live streams. It can also be books, recorded performances that require a fee to watch, templates for papers that people need, stock images of your artwork and whatever you can come up with.
The significant advantage of the income from those assets is its independence from your work. As soon as you have them up, they can sell while you do other things or sleep.
In the final stage (call it your endgame if you want), when your income from assets is higher than your costs of living, you can feed the money back into creating more assets.
How do we get there?
The abstract process to optimise your cash flow is really easy, like with most concepts. You start to build your first assets, which provide a little income. This money either goes directly into creating new assets or covers part of your fixed costs. This gives you a little bit of leverage (time or money) to continue building your reputation and assets. Now you repeat the process until your assets provide for your life.
The execution is not as easy, of course. Let me give you an example based on some real numbers from my own career. Suppose writing books would be the only way I had to create assets. At the moment I have only one book on the market. In the first three months of 2021, the average income through its sales was 91 bucks. Not a lot to write home about.
Let’s do some math. Imagine I have ten of those. Without considering that people who grabbed one book are more likely to buy more, there would be 910 bucks a month. Having 20 would be enough to make a living without doing any other work. Writing 20 books would surely take some time, and neither writing nor reading is for everyone. But in dance, there are way more options than just amassing books to sell. Having the right offer at the right time can make a substantial difference.
Be brave and be bold. Now is the time to make the change and take your financial well-being into your own hands.