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.

MYOB - How Much Do You Know About Author Finances?

 

ROGUE'S PAWN is out now! This first book in my original Covenant of Thorns trilogy has been re-released with gorgeous new covers. Look for book 2 coming July 26 and book 3 releasing August 16. 

     

Read Excerpt

***

This week at the SFF Seven we're MYOB - Minding your own business! 

Seriously, we're taking a long look at how we manage the financial side of being an author. There tends to be a wide range of strategies for managing author finances. As all authors are primarily creatives (with the small exception of the widget-makers who hire ghost writers to write for them, which is another kettle of stinky fish), not all possess the inclination to crunch numbers and balance accounts.

In truth, while I think all authors should have a thorough understanding of what they should be earning, not everyone needs to be a financial guru of their own writing career. In truth, the most comfortable place for an author - or perhaps any creative - to be is independent of the need to make money doing it. This, of course, requires either family money (marrying money counts) or a spouse with a great salary and benefits. In these cases, writing money is all "gravy" and I know many authors in this position who don't really track that income.

The major downside of this model is it means traditional publishing has favored those with this privilege and also takes shameless advantage of these authors. There can be a lot of funky tickling of the financials, both from publishing houses and literary agencies. Believe me: I've seen it.

Learn to read your royalty statements and hold those who handle your earnings accountable.

The flip side is if you're like me - someone who is supporting their household with writing income. This is the other extreme, where ALL finances are author finances. I track everything scrupulously, to the point of using mathematical models to predict my future income. That's the thing about writing income: it's super unpredictable. Sales wax and wane, often due to reasons beyond anyone's control. Traditional publishing pays quarterly if you're lucky and semi-annually otherwise. There's almost no way to predict what those checks will look like, so I end up behaving like the privileged writer as above - I treat my trad income as gravy.

Self-publishing income is what allows me to pay the bills with writing. That money comes in monthly and, because I can access my sales dashboards in real time, I can reasonably predict how much money will come in. The downside of self-publishing is that the author fronts the investment. KAK covered a lot of the nitty-gritty of self-publishing costs yesterday. Most self-publishing authors can implement the simple math of outflow vs. inflow. That is, what you pay to produce and market the book should be less than the money you make from it. Where it gets into higher math is managing that income so that you can cover the costs of being alive. 

With a salaried job, or even hourly income, the basic budgeting model is to figure your monthly income, subtract your expenses, and the rest is "disposable," meaning you can spend it on stuff you want vs. the stuff you need. But with a fluctuating monthly income, this simply isn't possible. 

So, my basic model is to try to keep enough money in savings to pay for two months of expenses should I have zero income in any given month. (Which hopefully will never happen, knock on wood. My backlist is substantial at this point, so the baseline backlist income is relatively steady.) Once I have that in place, I can pay for some of the things that make us happy. This is VERY important. It's tempting to confine oneself only to needs and funnel any "extra" money back into growing the business. This works okay for a while, but it gets soul-crushing over time. We work hard; we must also play hard. Anything else is unsustainable.

As a creative, maintaining your joy in the work is key!

From my initial announcement, you'll see I'm also republishing some of my trad-pubbed books. I did ten books with Carina Press and now have the rights back to all of them. Those royalties came in quarterly, so I'm eager to see how my income on those books changes for me. So far I only have ROGUE'S PAWN up again. Republishing meant paying for covers and formatting, so a bit of investment on my part. Hopefully it will pay off.

As with all businesses, writing for a living requires a lot of hoping for that pay off. Being smart about crunching those numbers provides the reality. A balance of both is best. 

The Financial Costs of Authorhood

This week's topic: Minding Your Business:

 How I Manage the Financial Side of Being an Author

The downside of being an indie author is that all the upfront financing comes from...me. Upside, I don't have additional layers of people with whom I share my royalties like a trad-published author would (no agents or publishing houses taking a percentage).

Now that I have eight books selling on leading retail sites, I have a fair idea of production and distribution costs. 

• Art can range from as little as $300 to as much as $5,000+. 
• There's an extra $200-$400 for social media and advertising art bundles. 
• Buying art may not include cover design (aka fonts, wraps, lettering, etc.). You might need to hire a designer in addition to the artist.
• Editing costs fluctuate with wordcount and the editor chosen. I've paid an average of $1,000 for 85k-word books and $3,500 for a 125k-word book. No, that's not a math failure, that's a difference in the per-word rate charged by different editors.
• Choosing the right editor(s) for your work is a topic for a different post. 
• Formatting for ebook and paperback is something I outsource. That's a couple hundred.
• While it's worth every sanity-saving penny to me, I am limited to what changes I can make in the future without incurring additional costs. Pro and con there.
• Production costs for print books and distribution costs for ebooks are higher the more graphics included in the novel. 
• In addition to a royalty share, digital distributors charge for file size.  
• Sure, I'd love to pepper artwork throughout the book, but that gets pricey fast.

Easy to see why indie authors may choose to pre-fund a novel via Kickstarter or Patreon, right? And the costs outlined above don't include the hours (aka months/years) spent writing the novel. 

I have not gotten into audiobooks because the upfront costs are too much compared to the odds of recouping those costs, much less generating net revenue. Good narrators are worth every penny. Bland or AI-generated narrators will chase away customers. Expect to pay for quality production (which should be part of the narrarator's cost-per-finished-hour rate), but don't expect this format to become your sales leader (compared to ebook or print). Yes, some narrators accept royalty-share payments, but that's not recommended for either party. A web search will provide many horror stories of why.

Advertising is a relentless money-eating monster. Welcome to the world of small business where making consumers aware that your product a) exists and b) is worth the purchase is critical. Sadly, there is no One Magical Success Formula. Unlike book production costs, advertising costs are ongoing and subject to constant fluctuations. ROI is a BFD and it must be monitored regularly to minimize losses. There are authors who spend thousands a month on advertising, and I am...not one of them. It's not in my budget to pay more for advertising than I do for my mortgage, health insurance, or total monthly cost of living. My income simply doesn't allow for it. 

Side note: Do not take out a personal loan for the sake of advertising (yes, it happens).  

How do I manage these finances? Basic math. Income - cost of living - splurges/savings/crises - book production costs - advertising budget. I use Excel to budget and track monthlies and YOY, though Quicken for Small Business is likely to come on the scene soon.

That Author Life

This week's topic at the SFF Seven is about how we manage our author business. This can get detailed, so I'll cover the basic organizational methods I use.

One thing I notice when chatting with newer authors is that many don't grasp that they are a small business. An entirely new way of thinking about yourself as an author and a brand AND the way you present and sell your product (your books) has to happen, and the methods used are often very different from writer to writer. Because everyone is going to run their business in their own way. It can help to get some tips, though, so you can see what works best for you.

For me, being an author requires days filled with nothing but accounting, mailing items to readers/influencers/etc, sending and replying to emails, and managing my online social presence and Etsy store, among many other things that don't equate to writing words. Thankfully, I've been in the writing world for over a decade and I've sat in on dozens of workshops and panels where these things have been discussed. So prior to this year when my publishing career truly began, I at least had an idea of what to expect, even if the reality hit way harder than I ever dreamed.

If you follow me at all, you know I'm a planner. I'm not sure how anyone can have a business without some sort of business plan and outlook, as well as proper record keeping. Here's a list of some of the things I do to keep track of everything:

1) I created a 5 year plan and broke it down into yearly and quarterly goals that can be adjusted as needed. 

2) I keep a Goal spreadsheet and update it every month-end and quarter. These goals include all my relevant social media numbers (Insta, TikTok, FB group, FB page, Bookbub), Goodreads review count, Goodreads adds, Amazon review numbers, newsletter count, money earned, books sold, and total Etsy sales. I can see the growth for the past 8 months at a glance. It's very informative, motivating, and keeps me focused on where I need to put a little more attention in order to meet my goals.

3) I keep Expense spreadsheets. This part became super intense really fast. I would've had an utter disaster on my hands come tax time had I not started keeping a record of all the expenses of my business. This includes everything from office supplies to character art to Etsy store supplies to necessary subscriptions/memberships and shipping costs. There's so much to track, so I have sheets for several things. I did an event recently and I put all my expenses in a spreadsheet labeled for that particular event. Next year, when I have more than one event, I'll create an Event Sheet. It would probably terrify most people to see the amount of spreadsheets I keep, but all I have to do at tax time is send my CPA my info and my taxes get done. The more organized I am on the front end, the easier things are on the back end.

4) I keep an Income-Earned spreadsheet. I do this by quarters that are broken into individual months since I get paid by my publisher quarterly. However, I have Etsy income as well as editing income, so those totals go in their respective months every month-end.

5) I use Expensify to store receipts. I cannot do clutter, so I don't keep paper receipts. 

6) I keep digital and printed copies of all contracts in proper folders.

7) I'm working on adding my author business info into my will and our family trust.

This is just an overview of things that I can think of off the top of my head. I hope, if you're looking for info on what to do as a new writer, that this helps. This side of the author life can be overwhelming, so my best advice, as always, is to get organized.

Happy writing!

Author drama - is it idiocy or a PR campaign?

 

Idiocy. There, I've said it. When an author (or anyone, for that matter) creates drama for any purpose, PR or otherwise, I question their sanity.

Drama might seem fun, entertaining and diverting, but someone always ends up getting hurt. As the person creating the drama, there's a good chance it'll be you. Or you and others. So, if you create drama to create sales, sure, go have a party if that’s what you need, but remember, it says a lot about you (and money doesn't make you happy … although, it will buy you the therapy you’re going to need).

I guess it might be a good idea to lay out some of the drama found in authoring circles. In my limited experience - because I actively try to stay out of it - author drama includes:

• Using trigger warnings as a marketing tool

• Picking an argument with a reader or other author online

• Making a public plagiarism accusation

• Piling on in controversial topics that are trending, especially regarding big name authors, to gain exposure, or just for fun

And while we're on the topic of piling on, for me, that's the one that makes it all so deplorable (and a 

horrible time sink). Others will jump aboard the drama train, because, well, who doesn't love a bit of gossip? Especially when it's to do with someone we’ve seen in a video once or twice, but don't know, so if we talk shit about them on the internet, it doesn't really matter. I've never actually read the book we're all slamming, but who cares? I can feel the buzz … the endorphin release … for I am part of the mob, and we are righteous in our cancel culture. Ooh, what fun.

But the thing is, those people that you kinda know, but don’t know? They may have done absolutely nothing to put themselves in the fray. And regardless of how outwardly rich, or successful, or self-confident a person may appear to be, nothing about their composition as a human changed when they became famous, their book began to sell, or the numbers in their bank balance increased. They too get that gut-punch feeling when their world falls apart. They too wonder if that dress makes their ass look the size of a small continent. Everyone goes on the internet, and, shockingly, success is not a barrier against … well … anything really. And nor is confidence a shield. Not that it’s only successful and confident people who get caught up in the drama (I’m looking at you, people who forced a teenaged girl off TikTok because she dared to publish a harmony some deemed ‘an abomination’. I actually quite liked it).

Don't get me wrong, PR is a key part of being an author. The market is crowded, and it's a tough business to be in. Authors have to put themselves out there and seek opportunities to find readers, and sometimes it’s hard to know where to draw the line. But sinking into the quagmire of attacking another human being on the internet is, if you ask me, less authoring, and more mean-kids-in-the-playground.

Even if it starts small, drama is impossible to control. Once something's out there, it's out there, and often takes on a life of its own. Which is what you want, if you're using drama for PR purposes. But it will have unintended consequences, and people will get hurt. Alas, drama has become the norm for so many, from politicians and celebrities, to corporations, journalists, and influencers. But just because everyone's doing it, does not mean it's right. 

HR Moore writes escapist fantasy with dangerous politics and swoon-worthy romance. She’s known for pacy writing, plot twists, and heroines who take no prisoners … and she loves a cliffhanger. HR also started FaRoFeb (Fantasy Romance February), a community for readers and authors to elevate and celebrate the fantasy romance genre. 

You can connect with HR Moore here: https://linktr.ee/hrmoore

Taking a Break from Drama

 Funny that we should be writing about author drama this week. Because you'll note that I've been a no-show for a few trips around the ole blog cycle. I'd like to think I had a good reason - but I suspect that's how most author drama starts. With the best of intentions. >>Peers at Twitter. Okay. Maybe not. 

 Anyway - I bailed because I went to Ireland.So accept this writerly drama in the form of a few photos:

This is the Abbey at Cong. 7th Century. Lovely old ruin with a familiar story. Everything was going along just fine for the monks living here until the Vikings landed and started killing everyone and taking their stuff.

    This is at Dún Aonghasa on Inis More in the Aran Islands. It's an old        ring fort overlooking the Atlantic Ocean. That cliff I'm sitting on goes        100 feet down to crashing waves - but I swear I am NOT sitting on the         edge of  the world. There was another sizeable slab of stone under my     feet.

 This is Galway. Lovely little city. It is the oldest port in Ireland. There are buildings still standing and in use that were built in medieval times. Recent archeological investigation discovered 12th century castle ruins just beneath the shopping district. Many of the businesses have put plexiglass into the floors to expose a bit of the history. The streets in Galway are startlingly narrow. Because the city is medieval in design, the roads were built for horse and buggy rather than cars. Houses and shops stand right up at the edge of the roads. Two buses meeting and trying to pass can be an adrenaline rush.

This is just an short snippet of the River Corrib in Galway.

Life is difficult, but you don't have to make it worse

 This week we’re talking about author drama: is it idiocy or a PR campaign. And I’ve gotta say, I’m part of an incredibly smart group of authors. Check out their posts, there’s some great advice on how to avoid and extract yourself from amped up situations. 

Me, I avoid drama. It’s bad for the health. I much prefer to stay zen and be supportive. Life isn’t always easy, but that doesn’t mean you have to invite negativity. I looked up drama quotes and this one from Anita Renfroe (who I guess is an author, I might have to check out one of her books) was perfect: 

I hope you have a lovely weekend and enjoy my fellow SFF Seveners’ posts!