Perspectives: Most people lack finacial literacy
One woman's mission to educate and empower creative people.
This week’s Perspectives is an interview with Hannah Cole. Hannah is the founder of Sunlight Tax, and she specializes in friendly, informative tax education for creatives, artists, and people who feel overwhelmed by the business world. Her mission is to empower creative people to set themselves up for long-term success and take control of the financial side of their careers through her program, Money Bootcamp. She also hosts the Sunlight Tax podcast.
As someone who has worked in banking/finance for most of my career, I found Hannah to have a very down-to-earth and refreshing take on taxes. You can connect with Hannah on Instagram, YouTube, TikTok, and LinkedIn.
Anna Burgess Yang: Tell me about your background.
Hannah Cole: I’m a total weirdo. I’m a professional artist. And that was what I knew I wanted to be when I grew up. I got my MFA, and I was actually a professor of painting at Boston University for a while. But at a few different points in my career, I had some really miserable experiences with accountants and with taxes. Terrible.
And like a lot of creative people, because of those awful experiences, I got a bit of an allergy to money. It was as though the world was saying, “Oh, you’re creative, then this isn’t for you.” Which is stupid. And inaccurate. But I passively absorbed that message.
Eventually, I got angry enough that I went back to school for accounting. I decided to specialize in taxes, in part just because I wanted to help my friends who were artists and creative people. Because it’s just so hard to even just be treated with respect when you are in that world.
ABY: What motivated you to focus on education instead of tax services?
HC: I started out doing tax prep for creative people. But I realized a couple of things. One, tax prep is a commodity business. You will be ground to dust by H&R Block and TurboTax. Anyone doing this work might use tax prep as a loss leader and bring you in for financial advisor services or monthly accounting. So that was a business decision.
The other thing is that there is so much financial illiteracy in the U.S. The Tax Foundation just did a survey and found that tax illiteracy costs the average U.S. taxpayer $1,000 per year just because they don’t understand how tax brackets work.
Also, people don’t even realize the bad smell of random tax advice that’s coming from someone without a license, and not someone you should be listening to.
ABY: What type of education do you focus on?
HC: I went to Yale, and I wanted a grounding in a broad liberal arts education. One of the things I was interested in was linguistics and cross-cultural communication. I’ve come to realize that this is my skill and my gift to the world. I translate the language of culture and accounting to the world of creative, dynamic freelance people who are out there taking risks and doing cool work. But they’re flying by the seat of their pants on the tax and accounting side.
One thing I feel strongly about is treating people I’m talking to with respect. The work they’re doing is amazing. I just don’t assume that they’ve learned any tax information. We should be taught in high school. But nobody has a baseline. I teach the basics to everyone. I do over 50 tax workshops per year for big organizations.
ABY: What do you think are some of the big misconceptions self-employed people have about taxes?
HC: Most people don’t realize that self-employment tax is going to be more than half of their tax bill, and most of their taxes are paying into Medicare and Social Security. When you work for an employer, your boss is paying into those systems on your behalf. So when you’re self-employed, that number gets doubled, and you don’t even know what it is.
People are radically underestimating how big their tax bill will be, and then they don’t know how the quarterly tax system works. Some people are really diligent and try to do a good job. Maybe they’re even setting aside money in a separate bank account. And that person doesn’t realize that they’re going to get penalized because they don’t pay every quarter as the law requires.
ABY: What is a challenging part of this type of education that you’re doing?
HC: Honestly, it’s just my reach and the fact that I’m just one person. I’m pushing against a culture that is anti-tax and anti-tax education. When I teach people, I teach the civics behind why we pay into Medicare and Social Security. It’s essentially insurance and works like life insurance.
I find that after my workshops, people think the system is much fairer. There’s unbelievably bad press out there, and usually when people have the information, they feel better about the system and paying into it and what it provides for them.
ABY: Do you think self-employed people struggle with the “paperwork” part of their finances?
HC: Yes, I think so. And it doesn’t have to be complicated. But when you only have random bits and pieces of info, it’s hard. For example, a lot of people try to do their bookkeeping off of receipts. It’s incredibly common, and it’s a nightmare.
Having a separate business bank account is a better baseline for your bookkeeping. Just that little shift makes the paperwork so simple. But I think people lack information about even getting to that point.
ABY: What types of formats do you think do really well in financial education?
HC: One thing is timing. People only get their eyes opened when they’re experiencing acute pain. And that’s an awful way to learn. That’s nothow I want people to learn, but that’s when people pay attention.
I try to have a mantra in my own business: “Never waste your pain.” If something is awful, take a minute. Do what you need to do to clean up the mess. But also, let’s stop the pain so we don’t continue to have it recur. Because taxes are there every single year. How do you want next year to look?
ABY: And you have a book, Taxes for Humans! What prompted you to write it?
HC: I’ve always loved writing. But what prompted me is that someone reached out after one of my workshops. I had an email in my inbox from a literary agent. I talk about how civics can feel really good and build a community that we want. Putting systems in place empowers people to do the amazing work they’re doing. The agent said, “I think you have a real vision, and this would make a good book.”
ABY: On top of everything you do with Sunlight Tax, you’re also an artist. How do you balance those two things?
HC: I think balance is a bit of a myth. There’s no way I could do tax workshops, talk to clients, and then go into the studio. I’d just be thinking about tax stuff. So I work seasonally. I’m 100% in when I’m teaching taxes. And then after tax season is over, in July and August, that’s my studio time. After April 15th, I can turn things onto a low simmer, and I can just walk away and be in my studio. I love that.
Last year, I lost my studio and all of my life’s work. Twenty years of art in Hurricane Helene. Things happen, and there’s no guarantee. It’s not like a hurricane is supposed to come five hours off the coast up a mountain. No one was prepared for it.
I was applying for FEMA aid and made a little help page – sunlighttax.com. I figured – not wasting my pain — let’s make a little tutorial about this for everyone else.
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