top of page
  • Writer's pictureMolly @ MM Strategic Advising

Avoid These Costly Money Mistakes As a Creative Entrepreneur

Updated: Jan 27, 2023

As a creative entrepreneur, it's easy to make money mistakes...and quite costly ones at that. After all, we don't even learn about personal finance in school, let alone business finance (unless you go to school for management). Quarterly taxes often are miscalculated or go unpaid, bad money habits develop, and spending isn't intentional and gets out of control. But don't worry - MM Strategic Advising is here to help! In this blog post, we'll discuss some of the most common financial mistakes made by creative entrepreneurs and provide tips on how to avoid them. We'll also share advice on how to manage your small business finances (yes, that includes your side hustle that you aren't treating as "real" yet!). So whether you're just starting out or you've been in business for a while, read on for helpful tips that will keep your wallet happy!

Financial Mistake #1: Not having separate business checking and savings accounts

This looks like:

  1. One bank account for business and personal expenses

  2. Lots of in and out flow in one account due to both business and personal transactions happening in the same place. Having groceries come out of the same account as business supplies makes accounting very difficult

  3. Lack of clarity around whether your business is actually making money month to month

Why it’s important to have separate business bank account:

  1. Accounting is easier

  2. Less missed deductions for taxes

  3. More write offs (like business account fees)

  4. Protects limited liability (LLC)* *nope, it's not automatic even if you filed your LLC!

If you are going to leave with one take away, this is it. When it comes to keeping your finances in order, the most important thing you can do is to keep your business and personal expenses separate. Having a dedicated account for your business income and expenses makes accounting much easier and can help you avoid missed deductions come tax time. Additionally, having a dedicated business account can help you take advantage of write-offs, like business account fees, that you might not be able to otherwise. Finally, keeping your business and personal finances separate protects your limited liability in the event that something goes wrong with your business.

Your business checking account is specifically for depositing business income (checks and credit card), paying business expenses, paying business credit card, paying yourself, and transferring money to business savings. Anything else and you risk your LLC protections.

There are a few steps you need to take in order to set up a separate bank account for your business. If you are a sole proprietor, this can be a personal checking account. However, if you are a single owner LLC, individual banks have different policies on whether you can open a personal checking account for business purposes or if it must be a business account. Business accounts often have minimum balances and some have maintenance fees, so you want to do your research. S and C Corps definitely need to open a proper business checking account and will need their EIN designation and DBA when doing so.

In addition to a checking account, you should also open a savings account for your business. This account can be used for large purchases, trainings, vacation or sick pay for you and your employees, etc. You may also want to consider opening a tax savings account specifically for your business taxes in order to avoid any potential IRS penalties or interest. Both of these savings accounts benefit from being high yield savings accounts so your money can keep working for you even when stored elsewhere.

Lastly, you will want to get a credit card for your business. This will come in handy for making purchases specifically for your business. It is important to remember that if you use your personal credit card for business purposes, you will want to keep track of those expenses separately so that you can deduct them come tax time. But also, you are risking "piercing the corporate veil" in combining your personal and business finances.

By following these simple steps, you can ensure that your finances are well-organized and protected in the event that something goes wrong with your business.

Steps to take today if you don't have a separate business account:

  1. Consider whether an online bank or a community bank is better for your needs. Online banks that I like are Ally and Novo.

  2. File your LLC and/or DBA and EIN paperwork if you do not have this yet.

  3. Open a checking account, savings account for big purchases, savings account for payroll (yes, even yours!), and a savings account for taxes. These can be separate accounts or can be envelopes within one savings account. Places like Ally and Novo allow you to create different buckets for different savings.

  4. Apply for a business credit card and link it to your business checking account.

Financial Mistake #2: Not learning your tax deductions

This looks like:

  1. Spending money on business items but not writing it off because you are afraid to

  2. Spending on items that are not deductible and trying to write them off

  3. Freezing during bookkeeping because you don’t know how to categorize your expenses


  1. Speeds up bookkeeping

  2. Keeps your money organized

  3. Less tax stress

  4. Lowers your tax bill

When it comes to taxes, there are a lot of things that business owners can deduct. However, many business owners either don't know about these deductions, or they are afraid to claim them. As a result, they end up spending money on things that are not deductible, potentially getting fined if they try to deduct these expenses, and overall being confused when it comes to bookkeeping and taxes. This can lead to a lot of stress throughout the year, not just tax season (you are making quarterly payments, right?)

Before we dig deeper, you need to know what your taxable income is. Taxable income is your gross income minus your ordinary and necessary expenses. Not every expense is tax deductible! For example, if you gross 60K in a year and have 20K in expenses, your taxable income is 40K. If you are based in the US, you will owe between 18% and 30% of that 40K to the IRS for taxes.

One of the best ways to learn about deductions is to research basic business deductions (ordinary expenses). These are expenses that are common for all businesses. Examples of these expenses include advertising, bank fees, travel, and office supplies. It's also a good idea to research deductions for your specific industry (necessary expenses). These are expenses that are required for you to run your business. For example, a visual artist will have different deductions than a copywriter. Even a photographer and videographer will have different necessary expenses.

Questions to ask yourself if something is a tax deduction:

  • Does it have anything to do with my business?

  • What is the function for my business?

  • Would I be buying this if it weren’t for my business?

  • Could I justify the expense to the IRS?

If you're unsure about whether or not something is a deduction, you can talk to a tax preparer. They will be able to help you figure out if the expense is deductible. Claiming deductions can help lower your tax bill and make tax season less stressful.

Bonus Question: Can you write off tax preparer fees?

Answer: It depends! If your tax preparer is billing you for business and personal all in one, you cannot write it off as a business expense. BUT if they bill your business taxes separately from your personal taxes, this is an expense you can write off.

Financial Mistake #3: Doing your bookkeeping once a year

This looks like:

  1. Putting off your bookkeeping every month because you’re too busy/don’t want to deal with it

  2. Work piling up and overwhelming you when you do sit down to do it

  3. Rushing through your bookkeeping right before taxes are due and missing deduction

If you're like most business owners, you probably don't love doing your bookkeeping. It can be time-consuming and it's not always the most exciting work. But it's important to do it regularly (weekly, biweekly, or monthly). Here's why:

  1. Keeps the work from piling up If you put off your bookkeeping every month, the work will eventually pile up and become overwhelming. It's much easier to stay on top of it if you do a little bit every every week or two weeks. I don't recommend going more than a month without looking at your books.

  2. Builds your bookkeeping muscle Just like any other skill, bookkeeping is a perishable skill. If you don't use it regularly, you'll forget how to do it. By doing your bookkeeping once a year, you'll keep that muscle fresh and strong.

  3. Keeps your finances up to date If you wait too long to do your bookkeeping, your financial records will start to get out of date. This can be problematic if you need to make any financial decisions or apply for loans.

  4. It will feel good to do it once you have the confidence! Once you get into the habit of doing your bookkeeping regularly, it will actually start to feel good. You'll feel more organized and in control of your finances. And when tax season rolls around, you'll be glad you did it!

New to bookkeeping? That's ok! Here are some easy steps to get you started.

Your Action Item: To develop a bookkeeping routine

  1. Determine the frequency of bookkeeping- I suggest 1x a week

  2. Determine the when of bookkeeping- Do it on the same day and the same time every week- think about when you have the emotional space to do this as well. When are you at your best? When do you have mental energy?

  3. Make a financial task list- for two weeks write down everything you do for your finances from buying supplies to paying your credit card bill to itemizing your expenses. Group and order those tasks into a way that makes sense to you. Finally, use your list every time you do your bookkeeping!

Need a financial task list? I've got a free one! Sign up and I'll email you a task to get you started!

Financial Mistake #4: Not saving for taxes throughout the year

This mistake usually causes people the most pain.

This looks like:

  1. Ignoring or avoiding taxes all together

  2. Planning to save but prioritizing other expenses

  3. Dipping into your tax savings when you need it

Reminder: This is not your money. It belongs to the IRS

Why it’s important to save for taxes regularly

  1. Helps you avoid a huge tax bill at the end of the year

  2. Protects you from paying underpayment penalties or interest- if you don’t do the quarterly payments, you will incur interest fees! And they are calculated daily.

  3. Gives you peace of mind that your taxes are taken care of

When it comes to taxes, one of the biggest mistakes people make is not saving throughout the year. This can cause a lot of pain come tax time, as you may end up owing a large sum of money.

Planning to save but prioritizing other expenses and dipping into your tax savings when you need it can all lead to trouble down the line. It's important to remember that this money belongs to the IRS and not to you.

Saving for taxes monthly or with every transaction can help you avoid a big tax bill at the end of the year. Paying your estimated taxes quarterly can also protect you from underpayment penalties or interest fees. And finally, knowing you have saved enough for taxes and paid sufficient quarterly taxes throughout the year will give you peace of mind that your taxes are taken care of.

In order to know how much to save, you need to be aware of your gross income and business expenses. From there, you can calculate your net income and start setting aside money each month. By following these simple steps, you can avoid a lot of stress and headache come tax time.

1) Set aside 20-30% of every transaction and put it into that tax savings account you set up in step #1. Your exact percentage will vary, so I recommend starting with 30%. Alternatively, if you have been in business for a few years and have a tax preparer, ask them for your tax savings percentage. Then transfer that money directly into savings.

1B) Another way to do this is to transfer money to your tax account monthly based on your income and expenses. If you have 10K in gross revenue for the month and 2K of expenses, you will want to transfer 30% of your net income. But make sure that your expenses are tax deductible to ensure you have transferred sufficient funds into the tax savings account.

2) Pay your quarterly taxes. If you think you will owe 16K in taxes over the course of the year, each quarterly payment should be 4K. Quarterly tax payments are due April 18, June 15, September 15, and January 15. These payments are made through your IRS account.

Are you reading this right before you file your taxes and you aren't sure if you saved enough? Here's a simple calculation to help you know whether you need to save a bit more in order to pay your tax bill this year.

  • Calculate your year to date net income

  • Multiply that by your tax savings percentage

  • Subtract any payments you’ve already made

Are you on track? If not, make a saving plan to catch up.

Bonus Question: Why are taxes so high? Why 30%? Is it better to have no reportable income?

Answer: In short, unlike W2 work, you are state and federal income paying taxes both for yourself and for your business. In W2 work, the place of business pays a significant portion of taxes that you never see. And whether it's better to have no income? You want to make money in your business. If you do not have any reportable income and therefore do not owe taxes, that also means that you haven't contributed to social security. So, when you want to go claim social security benefits, your benefit might be quite low because you haven't paid into the fund.

Financial Mistake #5: Not paying yourself or not paying yourself enough

This looks like:

  1. Only taking money out of your business when you absolutely need it for personal bills

  2. Being too scared of taking any money out of your business

  3. Personal debt or financial struggles

Why it's important (even if you are just starting out!):

  1. It puts you and your needs first! You want to make an impact in the world but you also need to live- lots of people I work with center the business’ needs and not their own

  2. Teaches your business to take care of you so you can maintain that habit as the business grows

  3. Gives you practice in healthy cash flow management

  4. Helps you get in the habit of payroll before you hire your first employee or contractor

As a business owner, it is important to make sure that you are taking care of yourself physically, mentally, and financially. This means that you should not only be paying yourself, but also making sure that you are putting money away for taxes and long-term savings.

One of the biggest mistakes that business owners make is not taking care of themselves first. This can lead to financial struggles and personal debt. It is important to remember that you need to take care of yourself in order to be able to take care of your business. Otherwise, you will not be able to sustain your business in the long run.

One way to make sure that you are taking care of yourself is by paying yourself on a regular basis. This can be once or twice a month, depending on your income and expenses. Make sure to budget for your personal spending as well as your business expenses so that you know how much you can afford to pay yourself. Additionally, set aside money for taxes and long-term savings so that you are prepared for the future.

By taking care of yourself first, you will be able to take care of your business more effectively in the long run. This will help you avoid financial struggles and maintain a healthy lifestyle.

Bonus Question: How much should I pay myself?

Answer: This answer is highly dependent on you and your lifestyle. If you have a second job that pays the bills, then you can pay yourself a bit less out of your business and set it aside. If you are all in without any other income streams, then you need to calculate your monthly and annual expenses, retirement needs, emergency savings needs, and general financial goals in order to determine your pay.

If you're not careful, there are a number of mistakes that can be made when it comes to running your own business. To summarize, here are five of the most common mistakes to avoid:

1. Not setting up a business bank account can lead to a lack of clarity regarding your monthly business expenses and whether or not your business is actually turning a profit. It's important to have a dedicated account for your business so you can easily track income and expenses. This will help you make more informed decisions about where to allocate your resources.

2. Not learning about which expenses are tax-deductible can result in either overspending on nondeductible items or failing to claim deductions for eligible expenses. When it comes to taxes, it pays to be knowledgeable about what you can and cannot deduct. This way, you can save money come tax time.

3. Doing your bookkeeping once a year instead of monthly can lead to an overwhelming amount of work at tax time, as well as missed opportunities to take advantage of deductions throughout the year. By staying on top of your bookkeeping on a monthly basis, you'll be able to stay organized and spot any potential deductions as they arise.

4. Not saving for taxes throughout the year can create financial difficulties when it comes time to pay your taxes. It's important to set aside money each month so you're not caught off guard come tax season. This way, you'll be able to pay your taxes in full and on time.

5. Not paying yourself, or not paying yourself enough, can lead to personal debt or financial struggles. As a business owner, it's important that you pay yourself a livable wage. Otherwise, you may find yourself having to dip into your business's profits just to make ends meet. And when you're out of money, it's hard to do anything else.

If you want to run a successful business and avoid these common mistakes, it is essential that you take the time to learn about what makes a good business owner and how to best manage your finances. With the right knowledge and discipline, you can overcome any challenges that come your way and build a sustainable, profitable business.

Want to learn more and work together? Reach out today! I'm a Financial Advisor who has not only led multi-million dollar organizations but who has also started and scaled two profitable small businesses. I've been there and can help you! Check out our services here.


Meet Molly, the Financial Advisor for Creative Entrepreneurs, Artists, and Small Business Owners!

Talking about money is hard. I make it easier.

After 20 years working in, managing, and eventually leading multi-million dollar arts organizations, AND the start-up of my own two successful businesses, I decided my passion was found in helping other creatives not only gain financial control, but thrive in the creative arts.

I want to help YOU have the freedom to live a creative life with a solid financial footing so that you can create your best work.

My goal is to help 300 individuals and creative business owners get solid when it comes to money and building the lives they want. Will you be one of them?

49 views0 comments


bottom of page