Finances for Authors

 

[I'm going to preface this blog entry by stating that I am not a financial professional. I am not a certified financial planner, and this is not official advice. I am also located in the United States, so any references to taxes or the like may not apply to you in your own country. Please do your own due diligence.]

Phew!

Now that that's out of the way, let's talk about everybody's favorite topic…finances. Specifically, what happens when that book you published goes live and you start receiving those tasty, tasty royalty checks. 

You just got paid. Yay! But…now what?

I look at my being an author as being truly self-employed. I am running my own company of one. I spend probably only half my time as an author writing, and the other half is broken up between social media, administrative tasks, and finances. Tracking how much I spend, where, and on what, has become a major part of my daily routine.

Here are a couple of pieces of info that I wish I had been given, so I hope some of them might be useful to you. But first, I want to explain a few words and abbreviations I'm going to throw around that might be new to you:

Gross: How much you made overall.

Net: How much you actually got to keep.

P&L: Profit and loss. Basically, how much you make and how much you lose. 

ACOS: Advertising Cost Of Sales. In order to make a dollar, how much of that dollar went to marketing?

Let's dive in!

Tracking

It's important to track your income and expenses! First, all the money you spend to make money as an author can be subtracted from your income as a business expense. This includes marketing, supplies, editing, covers, proofing, postage, and yes, even commissioned artwork.

I know, I know, you're probably a writer because you suck at math. That's okay. You don't need to be good at it. But luckily, free software like Google Sheets can do 90% of the work for you, and are a great and easy resource for tracking these kinds of things.

Hopefully, you'll never be audited. But if you are, you'll need all that documentation. Keep track of every purchase and every royalty check. I keep a fairly ridiculous spreadsheet where I track probably far more things than I need to. You can keep a shoebox with notes, it doesn't matter. Just keep it somewhere.

Budgeting

Every morning I look at my ad spend from the previous day, and balance it against the (estimated) income I've made. I then do some simple math: 

Gross Income - Ad Spend = Net Income. I then use that net income and divide it against the gross income to create my ACOS percent. AKA: What percentage of my gross income was spent on sales? 10%? 50%? 75%?

As to how much you should spend on your ads, it's entirely up to you and your goals. I threw money at my series when I was starting out and trying to get a foothold. But now, my stomach for "overspending" is weaker, and I tend to be more conservative. Especially if I think a series is in danger of not landing, and therefore not selling. 

Too many times I've dumped money on advertising and then realized the series wasn't ever going to make it back. Now, by tracking it regularly, I can keep an eye on things and twist the valves as much or as little as I need to.

But maybe you really want to spend a lot. Or maybe you want to spend nothing. That's totally your decision, just keep an eye on it either way.

Also budget in how much you want to spend on other things: like blog tours, discount ad runs, and commissioned artwork. It adds up and it can add up fast.

Now, let's talk about the other big place an author's income goes that you should pay attention to…

Taxes

Yep, that's right. 

You just got a healthy chunk of cash from royalties! Yay! Now, guess what? You have to pay a bunch of that to the government now. Both at the state and federal level. If you make over $600.00 a year, you have to pay these taxes on a quarterly basis. If you don't, you get slapped with a fine at the end of the year.

So it's important to remember that whatever money you've just made from a royalty check, a whole bunch of that is already earmarked to go elsewhere. Do not forget to include your estimated taxes when you build a budget for yourself.

How much you have to pay depends on what tax bracket you're in, and also how much your state charges for income taxes. Both of those vary wildly per person, so I won't bother including any specific numbers. But just remember that you pay your income taxes from your NET income, not your gross. Basically:

Gross Income - Business Expenses (whatever they are) = Net Income. Take a percentage of that net income for federal tax, and then whatever your state tax is, and then pocket that away to pay every 2-3 months. (You can pay your estimated taxes online, it's free and super easy.)

A Quick Bonus

One last quick financial factoid I discovered recently might be helpful to you: you can create a 401k for yourself as an author! 

It's called a "solo 401k", and it's designed for a sole-proprietor (such as yourself) to use some of your self-employed income to create a retirement fund for yourself. The details of this are complicated, but I set mine up in an afternoon. 

If you're interested in saving for a retirement fund, this is a great way to do it–and most people don't have access to this option. (And you can also do it if you also have a 401k through a day job!)

TL;DR:

That's just a glimpse into the kinds of things I try to keep an eye on when I’m thinking about finances as an author. Remember:

Track every penny that goes in and out.

Keep an eye on your budget.

Don't forget you need to pay taxes.

Happy accounting, everyone!

Kathryn Ann Kingsley

As an USA Today Bestselling Author and award-winning designer, Kat has always been a storyteller. She delights in spinning stories of the sweetest nightmares to delight her readers with her unique twist of horror and romance.

With ten years in script-writing for performances on both the stage and for tourism, she has always been writing in one form or another. When she isn’t penning down fiction, she works as Creative Director for a company that designs and builds large-scale interactive adventure games. There, she is the lead concept designer, handling everything from game and set design, to audio and lighting, to illustration and script writing. 

Also on her list of skills are artistic direction, scenic painting and props, special effects, and electronics. A graduate of Boston University with a BFA in Theatre Design, she has a passion for unique, creative, and unconventional experiences. In her spare time, she builds animatronics and takes trapeze classes.

Making the Monetary Climb

These are the Cliffs of Moher in Ireland. This particular stretch of rock you're looking at were the Cliffs of Insanity in the Princess Bride. Yes. There's a reason I'm using this photo to talk about author finances. 

It's because most of us have to start at zero income and slowly, painfully climb hand over hand up the sheer face of publishing in an attempt to reach some magical monetary number that will mean 'success' to us. 

The main issue for conquering author finances is knowing what that number is. It can't necessarily be arbitrary. Far too many of us are going to be sorely disappointed if we pick a million dollars out of thin air. We're probably going to fall from the rocks. 

What you want is a formula. And a plan. I can't hand you either. But maybe I can help you build your own.

Formula:

• What's your current monthly income from all sources? (Yes, factor in the birthday and holiday money, even if you never apply that to bills. If you are in a family that has more than one income, factor in the other incomes helping support the family unless you've been told you can't do that.)
  
• What's your monthly outgo? (It's super helpful to take a year+ and factor in all the insurance premiums and emergencies - car break downs, new tires, veterinary emergencies, emergency trips to ailing parents, etc, and then break that down into a monthly amount - this way you build an emergency cushion into the budgeting that will accommodate emergencies.)
• Decide on your drop deads - can you cancel the cable? Or other subscriptions? Reduce eating out? Where are you willing to shift quality of life in order to save some cash?

You now have an idea of how much money you'll need on a monthly basis to sustain a reasonable quality of life and keep the creditors at bay. You may also be depressed at this point. That's fair, but with this information, you can begin building a plan for how many books how often. You'll begin the climb up the face of that income goal. Does this mean that you'll join me in being bummed out every time you get a raise at the day job because the goalpost shifted? Only if you're not banking that income as a base for when you decide you've built your monthly author income to the point that you're ready to take the leap of leaving the day job entirely. Spoiler alert: With a solid savings account, you don't have to match your current day job income exactly before you bail. Depending on your risk tolerance, naturally. You merely have to close the gaps between reduced household expenses, all other sources of income, and your writing income. A year of gap closing with savings seems reasonable to me - you'll have to pick a time frame/risk vs reward scenario that works for your family.

It's also at this point, before you jump the day job ship, that you want to revisit your formula and add in author expenses - editors, book cover designers, ads, and whatever else you need to build a business. It may put off leaving a day job. Better that than finding yourself six months out having to scramble to find a new day job because the money got away from you.

Is any of this fun?

No.

It's a climb. But it is one anyone with determination and a plan can make.

Harsh Financial Realities

Author finances are, for me, a long series of wrenching trade offs. My balance sheet bleeds. I've been operating at a loss for enough years that I can no longer file with the IRS as an author. I've been relegated to hobbyist. Also, I've picked up a day job to help get the family through some of the current nonsense because there can never be enough employed people in a household during an economic downturn. At least I'm technical writing, I guess.

This all amounts to me having to make decisions about how and where I publish material based on cost. For the moment, that means that self publishing is out of my reach for the foreseeable future. Professional editors are worth their weight in gold. I prefer not to publish without an editor looking over my stories and calling me out on my bad habits. It's just I don't currently have the gold for that or for good cover art. That can all change at a moment's notice. But the more likely scenario is that I can change that with hard work and book releases. So I'll favor small presses (thank the heavens for The Wild Rose Press) and querying agents about getting back into traditional markets, maybe. Whether I like it or not, this is the way it is for now.

So what convinces me to part with my pinched pennies? Marketing. Low investment ads that allow me to play a long game to build an audience slowly as I finish up the SFR series this year. I committed the cash to join an authors' coop so I could learn from people who are out there in the trenches really doing a good job with marketing. They're being super generous with their knowledge. Learning new skills is always worth the money. Up to the point that you can't pay the mortgage, obviously, but so far that's not at risk. Knock wood.

I don't mean for any of this to come off as a complaint or a plea for any kind of sympathy. I want to be transparent. There are reasons people stop publishing. I won't because I can't. And I have just enough ego mingled with spite to keep throwing my pages out into the aether.

At least with most of the world on lock down, it's not like I'm missing conferences this year?

Y'all stay safe out there.

More Important than Money

Caught this gorgeous full moon setting in the warm sunrise colors on my run this morning. Glad I took my camera along. Although it annoyed me bouncing around, so I had to tuck it inside my zippered hoodie - which made me look pregnant, though unnaturally so.

Unnatural camera baby, ftw.

This week at the SFF Seven - whether by deliberate ploy or mental lapse (there's some debate on the topic - our calendar guru KAK missed giving us a topic. Therefore this week is an open "on-my-mind" theme.

What's on my mind? I hate to tell you guys, but it's marketing. And the love of money.

Quite topical, really, with the U.S. Presidential election coming down to its final days, with one candidate a multi-billionaire known for his devotion to building a commercial empire, his campaign heavily funded by other corporate giants.

But really it's mainly on my mind because I discovered last week that a "new" author selling incredibly well in a subgenre is a pseudonym for an woman who wrote in a totally different subgenre last year (and sold well, I understand) under a different pseudonym, both of which were different than the name under which she wrote a prominent review blog well known for taking authors to task for bad books and bad behavior.

Without going into detail, I can only say that this disturbs me because it feels so calculated. More than one of my sister authors - all equally disturbed - in discussing this new revelation said, "well, I guess she's laughing all the way to the bank."

And right. So it goes. She's found a formula that works, that apparently satisfies readers, and is making money at it. A lot of people will say there's nothing wrong with this, and there isn't.

There's nothing wrong with money. I happen to be a big fan of money, mostly because it makes for a much nicer quality of living. As someone who now totally relies on my book sales to pay the bills, I like for them to sell. Like most all of us, I suspect, I'd love to have a lot of money. I have a bathroom/kitchen dream remodel I like to fantasize about (and maybe collect pictures for, mumble, mumble). I'd love to travel and do it high end style. I'd like to have enough money that I wouldn't have to worry about money.

But there are more important things than money.

What's weird to me is that, several times lately when I've given my reason for not wanting to do certain kinds of marketing, or to plan books a certain way - which is that I believe some things are more important than money - people have actually laughed. And then they stop when they realize I'm not joking. Then kind of subside into an uncomfortable silence.

I suspect they think I'm being weird by saying that. Or perhaps naive.

Both could be true.

Still, I believe in this. The Bible says that the love of money is the root of all evil and the Taoists say that putting the pursuit of money above all else maddens the mind. This is a real thing - becoming consumed in the acquisition of money above all else can drive a person crazy. That's why we say money can't buy happiness. Sure, as David Lee Roth famously said, "Money can't buy happiness, but money can buy the big yacht you can park right next to where the happiness is." Why not? Hey! A big yacht could be great fun.

But there are more important things than money.

I had a birthday in August and, as is our culture these days, I received many good wishes via Facebook. It can be staggering, all those people - from ones I've known all my life to those I've never met in person, who may have only read my books - wishing me a happy birthday. A few however, were static images that said "happy birthday" or some such, along with the author's website address and book series. This was the first year I'd seen that. And I could imagine just how that came about. Some marketer gave the advice that when you wish someone a happy birthday on Facebook, you're missing a promotional opportunity if you don't have your author information on there.

My point is, what's more important to you - grabbing that promotional opportunity or wishing me well on my birthday? Maybe some of you are saying both. Maybe you're wisely pointing out that rando person I don't even know doesn't actually care about me or my birthday, so why would I even be naive about their intentions.

I just find it troublesome. If even wishing someone well on their birthday has an alternative agenda, what does that say about what's most important to us?

For me, writing books and telling stories is an expression of art. And I feel funny even typing that. Some of these writers of genre would curl their lip at me for that. Funny thing is - I've always celebrated that aspect of genre-writing. I started out in the literary/arts council world and grew weary of the nobly poor writer. I have zero patience with the idea that writing a good book takes years of angst and thrashing. When I transitioned from writing creative nonfiction to writing novels in fantasy and romance (and the interstitial places between), I loved this community for focusing on making it into a business. We're here to make a living at it. I've written before about the concept of selling out - and how I didn't believe in it. That "selling out" essentially demonizes making a profit from our art and that's bullshit.

I still believe that.

I also believe there are some things more important than money.

Telling a story for the story's sake is one. I think there's a huge difference between trope and formula. I believe there's a huge difference between art and manufacture. They might be difficult lines to draw, but I think we all have to find them. I believe there's a difference between creating something out of love versus designing it to sell. Maybe not in the end product - they may be indistinguishable - I mean for the creator. It's another version of me wishing someone a happy birthday out of a desire to celebrate their existence in the world and in my life, as opposed to doing it to gain attention.

I think personal integrity is more important than making money. I don't believe they're necessarily in opposition - you can both make money and have integrity - but if it comes to a choice between the two, then I choose integrity. My integrity may not be yours. Only we know what we're at peace with in our hearts. But I do think we all have to make this choice. It informs who we are as human beings.

I read an interesting essay recently by Joyce Carol Oates, Quilts, in a collection edited by Elizabeth Benedict called What My Mother Gave Me. (I linked to my Goodreads review of it - very much recommend the book.) Oates talks about an old quilt her mother gave her decades before, now very worn, and the comfort it gives her, now that her mother is gone, along with both her first and second husbands. She says,

In extremis we care very little for the public life - the life of the career - even the life of literature: it is comfort for which we yearn, but comfort can come to us from only a few, intimate sources.

There are more important things than money.