If your dream is to write full-time, then you need to learn to manage the money you make. You can expect to spend at least a couple of years working with little money coming in. Let's say you do land a big contract or your self-published book series starts to bring in a living income. How do you survive until your income meets or exceeds your expenses?
7 Finance Tips for Writers
Finance Tip 1: Have a financial plan and review it often
One of the best finance tips for writers is to have a financial plan. Your plan should identify:
- Your budget. How much money do you have for your writing (this is even more important if you are an indie or self-publisher.)
- How much money you believe you will make off the sales of all your writing. This would include all your sales including short story sales, novel, free-lancing and non-fiction/advice sales.
- Identify any money you have saved or are making that you are reserving for your company.
- How much money you need to meet your expenses each month.
- Expect that when you start out your sales will exceed your income. Know how you will pay for your expenses until your writing income equals your costs.
- Remember you will have to pay taxes on your writing income. If you do not have a tax accountant familiar with deductions for a writing business, make finding one a priority.
- Talk to an insurance agent and determine if you need insurance against someone suing you for stealing a fiction idea, breach of contract, violating a trademark or accusations of slander. Insurance for writing businesses are generally not expensive and can save you headaches and your business!
- Make sure you identify who inherits your rights if you pass away and that they understand the value of those rights.
Finance Tip 2: Have a business checking account and a savings account
Put any extra money you have over and above what you need to keep your writing career into a savings account. It is easy to underestimate how much money you spend. Writers today often need to cover their marketing, branding and PR expenses even if you publish with a traditional publisher. You can find yourself spending more than you anticipated.
Opportunities often present unforeseen expenses. Win an award? You might find yourself needing to pay for your airplane ticket, taxi cab, hotel or even a decent dress to wear during your acceptance speech. And what about those networking invitations to go out to dinner at restaurants where entrees cost as much as your website hosting fee?
Put as much money in your business checking account as you have budgeted for the year. Then, if you find yourself running short for good or bad reasons, you can transfer money from your savings account into your checking account. If you follow this strategy, you will have be much more aware of how much money you are spending and be more likely to stay close to your original budget.
Finance Tip 3: Track your expenses electronically and on paper
In addition to tracking your finances in electronic files, keep a copy of your financial plan, your budget, your expenses and income in hard copy format. Keep your electronic records current by entering costs and revenues monthly to save you time and headaches at tax time. Keep a hard copy of your year-to-date money spent, and money earned, handy for when you are trying to decide if you can afford that unexpected expense that you believe will help your business grow.
Finance Tip 4: Spend your time on tasks that will make you a buck or save you a buck
When I first started my indie-publishing business the author and businessman, M.L. Buchman gave me one of the best finance tips for writers I have received: don't spend time on tasks that do not make you a buck or save you buck. This is excellent advice. It requires discipline, especially when you start out.
Do you spend an hour during your writing business time reading Facebook posts? That will help you make a living wage if reading Facebook leads to profitable business relationships that earn you money, but if you are spending business time on learning about strange things cats do, you might need to ask yourself if you want to make money as a cat behavioral expert or a mystery writer. Don't get me wrong. All reading will eventually benefit a writer, but guard your time for creating things you can sell, i.e. activities that will make you a buck. In the evening, when you are too tired to write, you can watch cat videos. The same thing goes for video games, watching TV, etc.
Finance Tip 5: Have a backup plan
Many things can throw off a financial plan. That small press book contract you signed? It won't be worth much if the publisher goes bankrupt. Always know what you will do if the money you expect to come in does not make it to your bank account. Your backup plan might be to drop a service that requires a monthly payment. It might be to teach more online classes. It might be to go to work at MacDonald's, but always have a plan for what you will do if you run out of money.
That doesn't mean you quit writing. You just need a strategy for bringing in enough money to allow you to get back to where you can write full time.
Finance Tip 6: Have a monthly finance meeting
When it comes to financial decision making it can be beneficial to have someone you trust to talk to about opportunities and failures you may experience. This can be a spouse or a trusted friend. The person does not have to be another writer and in fact, sometimes, sharing your financial situation and decisions with other writers can lead to jealousies. The other person doesn't have to be a financial expert either. They just need to be a good listener with sound judgement. You will find reviewing what you hoped to make and spend, what you did make and spend and what you expect to earn will give you the perspective you need to make sound financial decisions for your business.
And, by the way, ask your tax accountant if a monthly financial meeting at a restaurant with the person you choose is tax deductible. In many states, it is considered a business meeting.
Finance Tip 7: Read books and blogs that provide finance tips for writers
Reading finance tips for writers is not generally high on an author's reading list. Let's face it there are more great fiction books than we have time to read, but by learning about finance, you gain ideas on how to better manage the money for your writing business. You also will be inspired to think more about how you will develop as a successful writer. Being the creative that you are, you will soon find yourself coming up with some great ideas of your own how to make money as an artist, and that will allow you to do what you really love – write!
Don't have a financial plan for your writing career?
I have an entire chapter on writing a financial plan in my book, “The Writer's Business Plan,” including a template and worksheet that will help you pull together your plan.
Want more financial advice for writers? Check out these online articles:
7 Money Management Tips for Freelance Writers by Carol Tice
Money for Authors: Income, Profit, And Cashflow by Joanna Penn