Money is the most powerful metaphor we have. For many people it represents their self-worth, their standing, their power and their security. In many ways artists are a little different—we have a life where we choose to value different things than the rest of society – freedom, both artistic and from societal norms, as well as intellectual independence. Our very existence can be seen as a challenge to capitalism. It’s why some people feel threatened by us—our choice to place a high value on things other than money might call into question their own choices and values.

So I understand why many artists may want to or feel as though they live outside the “regular” financial system. However, we all still must function within it. I have seen too many artists succumb to their own lack of financial knowledge and security – by giving up art, making outsized financial sacrifices (like homeownership, children, or secure retirement), and even becoming destitute. Money can be very emotional: not knowing how to manage it can make us feel out of control, anxious, overwhelmed, and ashamed.

But the flipside is wonderful. Taking some basic steps to control your money is empowering. It can prolong your career, help you meet personal and professional goals, and set your mind at ease.

I’d like to outline the most basic ideas of personal finance. There are tomes written on each single line below, and a million variations. But since feeling overwhelmed can cause paralysis, I want to assure you that the very basics of solid personal finance are universal.* Here they are.

Step One: Avoid Disaster

A lot of people forget this step. But taking measures to avoid a financial disaster is critical to your wellbeing. Millions of Americans are just one car accident/illness/missed day of work away from financial ruin. Here’s what you need in place to avoid that:

Health insurance. Here’s a stark picture: Since Obamacare took effect in 2010, there has been a 50% decline in personal bankruptcies. In other words, having health insurance prevents financial disaster. Consider it a priority in your financial life, as well as for your health.

Life insurance is something you can skip if you’re single. But if you’re married and depend on your spouse’s income to live, and without question if you have children, you need to have life insurance (on yourself, your spouse, or both). Term life insurance is best and cheapest – the basic idea is that you are insured for only a certain specified term of your life – when you really need it – and the coverage and cost fade out as you near financial security in later years. Important to note that it assumes you have a healthy financial picture.

Emergency fund. Before you do anything else with your money, save up and set aside (in a low-risk account) 3-6 months of living expenses. This is the cushion that keeps you safe (as in, not homeless) in the event of a job loss, a health emergency or other unexpected life event.

Step Two: Get Out of Debt

Ideally, don’t get into debt in the first place. But if you have debt, and many of us do, pay it off in the order of interest. This means that generally you want to pay off high-interest loans (like credit cards) first, and work your way down. Once you get to the debt that has an interest rate of under 8%, it starts to make sense to reprioritize where you put your money. Here’s the theory: historically, investing money in the stock market has an average return of 8% on your money over time (this is the conventional wisdom, and some will disagree). Of course that varies tremendously from year to year. It’s very important in all finance to remember that investing is about trends over the long-term. So basically, once your debt is costing you less than 8% a year, the theory goes that you’re better off investing money in the stock market than paying it back immediately. What to do with your debt in this 8% range is tricky. I’m not personally a fan of debt at all.

The next item to understand is that some of your debt – likely a mortgage or student loan you’ve taken out in this last low-interest decade – will be at a substantially lower rate. More like 2-5%. This debt is significantly below the expected return of investing in the stock market, so for that reason, it’s a lower priority to pay off, as long as you are investing money in stock. Realize that this debt is still costing you money – so it is good to pay it off, you just don’t need to be as quick as you do with high-interest credit card debt.

Steps Three: Save Your Money

Once your high-interest debt is paid off, you can begin funding your future. Most financial experts agree that for the two big-ticket items, your childrens’ college fund and your own retirement, your priority should be retirement first, kids’ college second. This may sound counterintuitive, but there are a lot of reasons why it’s true. First, you can borrow for college, but you can’t borrow for retirement. Second, there are other ways of paying for college – part-time work, scholarships and loans. But retirement is inflexible. Thirdly, if you don’t have financial security, you are risking your children’s future financial security if something should happen to you in your golden years. No parent means to burden their child with home health care needs, cancer treatment, or an assisted living facility. But if you haven’t saved for these possibilities yourself, your kids are going to be obligated – and probably right when they’ve just bought a house and are paying the high cost of daycare. I’m not saying don’t pay for your child’s college education. But the bigger financial burden on your children is to not plan for your own end-of-life needs, and that should come first. You need to put the oxygen mask on yourself before assisting others.

Step Four – Grow Your Money (Invest)

It’s easy to get overwhelmed at the thought of investing. Some people avoid it altogether because of this. But in my opinion (and Warren Buffett’s), the easiest investing option is also the best one: index funds. So my feeling is, start with this, and if you want to do more research and get into more complex investing, go right ahead.

An index fund is basically a representative slice of the US stock market. It is comprised of a proportional piece of each of the stocks represented in a given market, say, the S+P 500. It is “indexed” to that market. When the market goes up, or down, the index fund goes up or down. Historically, the market tends to go up over time (even though there will be down years). But index funds are great for more reasons. Primarily, they are cheaper. There is no manager for an index fund, so none of your money gets eaten by a management fee. There is much less trading in an index fund than in an actively managed fund, so there are fewer taxable transactions. Those factors alone are enough to make index funds better – but there’s one important final factor. No one can beat the market. People try. And they win sometimes. But over time, active managers don’t come out ahead of the market more than half the time (ie chance). So given all of that, index funds are the boring, inexpensive, obvious way to go. Vanguard is the best and lowest cost provider of index funds.

Bonus: Factoring in Your Timeline

An important consideration in investing to grow your money is your risk tolerance and your timeline. All investing involves the risk of losing your money. But some investments are more likely to incur losses than others. Conventional wisdom says that stocks are riskier, in that they fluctuate up and down with events in the economy, but that they have a higher rate of growth over time. Bonds are seen as low-risk, but they don’t grow as much.

In terms of timeline, you generally want your money to be in the stock market for as long as you can, and you want to leave it there. Don’t get nervous and sell it all when the market goes down. In fact, generally speaking, a downturn is when you want to buy stock (buy low, sell high – sound familiar?). But human emotion being what it is, most people do the opposite. They buy high (“the stock market is booming, I’ve got to get in on this!”) and sell low (“the market has bottomed out. I better sell it all before it goes to zero!”). So truly, the best investment strategy is to put your money in the market and hang tight for several decades without fretting over the market’s swings.

The longer your time horizon, the more aggressively (closer to 100% of it) you can have money in the stock market. For shorter horizons (a downpayment, college tuition, impending retirement) you want to mix in more conservative investments – like bonds. In general, you want to have the maximum time possible for growth, and as you get closer to needing to use your money, you want to move it over into more stable investments. The stock market goes up and down, even though the long-term trend is up. The idea is that if you need the money for grad school next year, you don’t want to put it all into the stock market, where a sudden drop could cut your money in half. But if you’re investing for a retirement that is 40 years away, a drop next year doesn’t matter. It might make you feel sick to your stomach temporarily – but it will generally recover and grow well again over the long term.

There are millions of books on investment strategy, and I’m trying to summarize it in a few lines, so just know that this is the absolute tip of the iceberg.

My hope is that this personal finance cheat sheet will give you a sense of direction and focus. In a future post, I’ll get into some of the “how to” part of saving.

If you’re inspired to kick your financial life into gear, I highly recommend a little more reading. Most of my own knowledge comes from a single Suze Orman book on personal finance that I read a decade ago. Reading that one book was the single most empowering thing I ever did. And now there are also some fabulous blogs, in every flavor from highly empathetic to I-need-my-ass-kicked-into-gear, to the nerdy and technical. Whatever you do, don’t let perfection or info-overload get in your way. Remember that whatever the details, the basics remain the same for everyone. Use this guidepost, and go forth and build yourself a more stable future.

DISCLAIMER: I am not a financial planner or advisor, so don’t take this as financial advice for you. Your situation has its own unique curves. This is a basic framework for your general information and understanding.

Bio: Hannah Cole is an artist and Enrolled Agent. She is the founder of Sunlight Tax.

Tagged as: artists, The Hustle