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10 Best Finance Tips for Freelance Animators

ben marvazi 2020

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Being a freelance animator can be challenging especially when it comes to finances, not just because your paycheck isn’t consistent, but also because you’ll have to manage your personal finances by yourself.

For instance, you’ll have to plan for your taxes. This includes the self-employment tax and the business tax you will be charged with depending on the structure of your animation business. You will also have to apply for healthcare benefits and calculate your own paid vacation leaves.

In this blog post, we give you the ten best finance tips for freelance animators to help you manage your animation business.

1) Consult With an Accountant

a man and an accountant having a meeting

Image by Scott Graham via Unsplash

If you’re starting your own animation studio and are overwhelmed with the things you have to do in the area of finances, you can benefit from consulting a certified public accountant (CPA).

An accountant can advise you on your business plan, acquire the proper permits and licenses, teach you how to bookkeep and write financial statements, and help plan the expenses and financial emergencies for your animation business.

2) Open a Bank Account for Your Animation Business

man pressing buttons on an ATM machine

Image by Eduardo Soares via Unsplash

One of the first pieces of advice that an accountant will be most likely to give you is that you should open a separate bank account for your business.

Having a separate bank account for your animation business allows you to have more organized and accurate bookkeeping. Whenever your animation client would send their payment, you won’t have to worry about having to distinguish the transaction from personal ones.

When you’re researching banks that can offer you a business account, make sure to look at the following factors:

  • Interest rates (for savings, checking, and credit). Interest rates vary per bank and they can impact your finances in the long run, so make sure to check them before committing to a bank.
  • Transaction fees. Many banks will charge you a fee per transaction and the price of these can vary per institution.
  • Opening promos. Banks often offer benefits for newly opened accounts. These benefits might include cash bonuses or rewards points.
  • Transaction methods. For your convenience, make sure to look at the bank’s available transaction methods - ATM, online banking, mobile banking. It may be useful to have more options available to you.

There are different kinds of business accounts to choose from for your animation business. A business savings account is a good place to keep profits that you don’t plan on accessing very much. While a savings account allows you to earn interest, it only allows you limited access to these funds.

A business checking account has significantly fewer restrictions than a business savings account. It offers many ways for you to withdraw your funds such as wire transfer, branch deposits, ATM, and mobile banking.

Some checking accounts allow only a certain number of free transactions per month. If you exceed this limit, you will have to pay extra fees per transaction. Make sure to choose a business checking account that allows enough free transactions for your animation business.

A merchant account is for payments, especially debit or credit transactions. When an animation client pays you for your work, the money first goes into a merchant account before getting automatically transferred to your other business accounts after a few business days.

Before you set up a merchant account, make sure to read the fine print first. These accounts have a lot of fees attached to them. Not only will you have to pay for the application and set up, but you will most likely be charged a fee per transaction as well.

3) Improve Your Financial Literacy

newspapers about financial literacy

Image by Annie Spratt via Unsplash

A study conducted by the FINRA Investor Education Foundation found that most American young adults (aged 18 to 34 years old) are financially illiterate. Two-thirds of American households don’t have an emergency fund that could cover even six weeks' worth of savings.

Financial literacy refers to the ability to understand how to manage one’s money and how to invest and budget one’s finances. It’s a crucial life skill that alarmingly many people today don’t have.

Early on in your animation career, you might struggle with making a stable income, especially if you don’t have enough clients yet. Being financially literate gives you a much better chance of enduring the inevitable ups and downs of your financial life as an animator.

The sooner you become financially literate, the better. Don’t wait for a financial emergency to be financially literate. It’s better to be prepared because you’ll never know when you’ll need knowledge about managing your finances.

Take classes on financial literacy or hire an accountant who can teach you the basics of bookkeeping, budgeting, and investing for your animation business.

Apart from classes, another resource you can look into is financial newsletters. Author and consumer expert Clark Howard has a free financial newsletter you can subscribe to for answers to your biggest financial questions, including how to save for retirement, and how to pay off debt.

You can also listen to financial podcasts. Aside from having a newsletter, Clark Howard also has a podcast where he discusses financial matters and advice. He uploads new episodes every day on weekdays.

Another podcast that’s great for novices is “So Money”. In her weekly episodes, host and personal finance expert Farnoosh Torabi discusses basic money management tips, including paying off credit card debts, starting a business, and investing in stocks.

4) Invest in Your Animation Education

woman wearing a graduation toga and cap

Image by MD Duran via Unsplash

Continue your animation education by learning not just about animation skills but the business side of animation as well.

Join our Animation Accelerator Program, a program designed for experienced animators like you to learn about the business skills they must master to succeed as a freelance animator or studio owner in the modern world!

The program teaches animators how to create high-quality animation videos while on tight deadlines, how to find and retain clients, and how to grow their client’s businesses while growing their own animation businesses.

It consists of video training modules, monthly calls with the program coach, support, sales email templates, leads, contracts, and other resources you'll need to fast-track your success.

5) Keep Track of Your Finances

a man looking at his wallet and money

Image by Artem Beliaikin via Unsplash

Know where your money is coming from and where it’s going. Luckily, there are various accounting software you can use if you want to manage your personal and animation business finances yourself.

QuickBooks is a cloud-based accounting software that allows you to access your records at any time on any device. It helps you track your sales, profits, and expenses and allows you to create professional-looking invoices and reports to send to animation clients and collaborators.

It also has 3 different plans available depending on your business needs. Each plan also has a free 30-day trial.

Another software is Pabbly and its most appealing feature is its subscription billing model. This means the software, unlike the others on the market, doesn’t charge extra fees per transaction on top of the subscription fee.

It also automates business workflows such as customer communication. Pabbly sends you email notifications regarding your transactions - whether they were successful, failed, refunded, or canceled - allowing you to run your animation business more smoothly.

6) Create a Budget and Stick to It

a woman who is on a budget

Budget Saving Money GIF via GIPHY

If you’re new to budgeting as a freelance animator or studio owner, an easy guide to remember is the 50/30/20 budget. Fifty percent of your income should go to obligations. This includes rent, bills, and other recurring payments such as membership fees and subscriptions.

Ideally, you can spend up to 30 percent of your monthly income on discretionary expenses, or non-essential expenses.

These include hobby-related expenses such as equipment for exercising and crafting, as well as vacation expenses, specialty beverages such as coffee and alcohol, and entertainment-related expenses such as streaming service subscriptions.

Lastly, leave 20 percent of your income from your animation business for your savings. This category can be split into other sub-categories, including emergency funds, retirement funds, and any debt repayments you have to take care of.

7) Ensure Your Healthcare Coverage

Bernie Sanders talking about healthcare

Bernie Sanders Healthcare GIF by GIPHY News via GIPHY

As a freelance animator or studio owner, you’ll also have to plan for your own sick leaves and vacation days, file your own taxes, and compute your healthcare rate.

The best places to apply for healthcare coverage are at or Freelancers Union. The Freelancers Union also offers other benefits such as vision, dental, disability, term life, and liability insurance.

8) Set Aside Money for Taxes and Insurance

a woman managing her taxes

Image by Kelly Sikkema via Unsplash

Being self-employed means that your taxes aren’t automatically deducted from your paychecks the way they would be if you were employed at an animation studio. This means that you have the added task of filing them yourself.

Taxes can also be a headache if you’re new to them, so this is also where consulting an accountant will come in handy.

The structure of your animation business will determine how much you will pay in taxes. The larger your business structure, the more tax benefits you can get. For example, a sole proprietorship requires you to pay less in taxes but doesn’t protect your personal assets.

On the other hand, if your animation business makes enough profits to qualify as a corporation or LLC, you will have to pay federal, state, and unemployment taxes, but you won’t be subject to double taxation.

9) Build an Emergency Fund

someone putting a coin in a piggy bank

Image by Damir Spanic via Unsplash

It can be difficult to set aside money for your emergency fund, especially if you’re struggling with paying off debts and paying for essential expenses. Ideally, you should be setting aside money to cover up to 6 months’ worth of expenses.

But building an emergency fund doesn’t end at setting aside some money for a rainy day. It also matters where you put the money.

One place you can put your savings in a high-yield savings account. The account will have an interest rate that compounds periodically - often annually - and you’ll be able to withdraw whenever you need to.

10) Save Up for Retirement

saving coins in a pot

Image by Micheile Henderson via Unsplash

One of the most important preparations you can make for the future is your retirement plan. Saving for retirement is also one of the many ways in which financial literacy is useful.

For freelance animators or studio owners, setting up a retirement plan is another do-it-yourself task, so it’s an advantage to be well-educated on the matter.

There are 4 kinds of retirement plans you can choose between as a self-employed animator. These are the SEP IRA, one-participant 401(k), SIMPLE IRA, and Keogh plan.

The SEP IRA, also known as the simplified employee pension, is known as the easiest plan to set up and is ideal for sole proprietor businesses, but also has room for a few employees. This plan only allows you to contribute as an employer.

But while it’s the easiest to set up, this plan is also best for businesses that make enough profits, as the contributions are made according to a percentage of the profits - up to 25% to be exact.

The one-participant 401(k) plan is similar to its corporate counterpart. It’s for sole proprietors with no employees. With this retirement plan, you can make contributions as both the employer (the business owner) and the employee (the animator).

The SIMPLE IRA, savings incentive match plan is best for animation businesses with more than just a few employees, as it may be too expensive for smaller animation studios.

Similar to the one-participant 401(k) plan, both employer and employee make contributions to the SIMPLE IRA plan. Employers can annually contribute up to 2-3% of their employees’ income to the plans of participating and eligible employees.

The Keogh or HR 10 plan is the most complicated plan for freelance motion designers to set up but also has the biggest potential retirement benefits. A Keogh plan can either be a defined-contribution plan or defined-benefit plan. 

A defined-contribution plan means that contributions will be set according to a fixed percentage. Meanwhile, a defined-benefit plan means that contributions will be calculated based on a formula that takes into account certain factors.

These factors include the employee’s employment history and how long they’ve been working for the business.

To be eligible for a Keogh plan, your animation business must be unincorporated and structured as a sole proprietorship, partnership, or limited liability company (LLC) only.

Contact a financial institution and ask them which plan they have best suits your animation business. Most institutions offer some form of IRA, so you can easily set up an account at one of the major online brokerages.

Finding the best self-employment retirement plan may take more research as not all brokers have all types of plans available, but a high-quality broker will offer no extra charges to set it up.


Everyone needs a certain level of financial literacy. If you’re a freelance animator, financial literacy is one of the most important skills in your arsenal - second only to your skills as an animator.

Apart from running your animation business, you will also be responsible for paying taxes and setting up your retirement fund. For non-freelancers, these tasks come easier as they are already ingrained into the payroll system.

Owning an animation business also means you have to track your finances seriously to help you determine where your money is coming from and where it’s going while also leaving enough for you to put into your retirement plan and emergency fund.

If you’re new to managing personal and professional finances, it will greatly benefit you to consult an accountant. They can also assist you with calculating your taxes, and structuring your animation business, and setting achievable financial goals according to your profits and capital.

If you want to learn more about managing an animation business, sign up for our free masterclass and download our free marketing handbook.

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