Finances for authors. It’s not the most appealing topic for people who spend their time with words…but wherever you are on your writing path, it’s never too early to start thinking about how to manage your expenses, especially in relation to current and/or future profits.
Honing in on what’s most important is vital. It’s so easy to get sucked into the mire of endless blind spending with all of the resources out there. It’s important to evaluate what you actually need, based on where you are in your career.
For example, if you are just starting out or working on your first novel, perhaps spending on courses and conferences that will help you learn more about your craft is where you want to direct your financial resources.
If you are further along in your career, conferences may give you an opportunity to pitch to agents or network. These expenses are necessarily quantifiable, but they do potentially move you forward in your career.
As you get even father along, writing conferences might give way to reader-centric conferences because your goal at this point may not be honing your craft, but rather reaching readers.
All those programs that every author is drawn into using must also be evaluated. I use Canva on a daily basis for a variety of projects connected to WriterSpark, as well as my own writing career. I also use it for personal projects. So Canva is essential for me.
Renewing my web hosting and domain name is essential.
BookBrush is not essential, but I use it frequently and in my opinion, it’s worth it.
What about BookFunnel, Prolific Works, and myriad other resources? Think about each one and how it helps you.
Profit versus loss. What are you bringing in versus what are you spending? If an author makes six figures but spends 90% of that revenue on marketing, then their profit is actually quite low.
If a mid-list author is making far less, but also only spends 10% on marketing, their actual profit might be much more than the six-figure author.
The bottom line is that sticking your head in the sand and not thinking about this stuff isn’t helpful to your bottom line. Face your financial life head-on.
Here are seven tips and tricks to help you manage your finances as an author:
1. Start with a budget
A budget is an essential tool for managing your finances. It helps you track your income and expenses, so you can see where your money is going and adjust accordingly. You can use a spreadsheet or budgeting app to create a budget and track your spending on a regular basis.
Include all income sources, which includes book sales and any additional revenue streams. Also include all expenses including marketing costs, software subscriptions, and any other expenses related to your writing career.
2. Consider hiring a professional
If you’re at the point in your career where hiring an accountant or bookkeeper makes sense, really give it some thought. If you’re not sure, think about the pros and cons of taking that step. A financial expert can help you understand your tax “buckets”, create a budget, and more.
3. Keep track of your expenses
It’s essential to keep track of all your expenses so you can accurately account for them on your tax returns (see tax “buckets” above). Use software or an app to record itemized expenses, use a simple spreadsheet, or even just a notebook. Do what works for you, but find a way to keep track of royalties, receipts, expenses, and invoices. Make sure you track marketing and promotional costs, writing software, educational resources, and travel expenses.
4. Develop a royalty tracking system
As an author, it’s essential to track your royalties accurately (see above). Use a spreadsheet or software to keep track of your book sales, royalty rates, and payments received. By tracking your royalties, you can ensure you are receiving accurate payments, and you can also know what percentage of your revenue you want to devote to expenditures.
5. Plan for taxes
As an author, you are elf-employed. That means you have to pay your own taxes! You will be able to claim deductions (home office expenses, business travel costs to conferences, for example, and other resources). Working with an accountant or tax professional will help you understand how to plan for your tax burden (see #2).
6. Plan for emergencies
Unexpected expenses happen. This is life; those emergency expenses happen. Maintain an emergency fund to cover unexpected expenses such as medical bills or surprise taxes. Ideally, having at least three to six months’ worth of expenses gives you a solid buffer. This is true for any self-employed person.
7. Pay Yourself First
Based on Mike Michalowicz’s book Profit First, pay yourself first. What is left is for your other “buckets” (tax “bucket”, marketing “bucket”, emergency “bucket”…)
To wrap up, managing your finances as an author is critical to your financial success. By creating a budget, keeping track of expenses, and developing a royalty tracking system, you will know what is coming in, what is going out, and you’ll know how to make adjustments to plan for taxes and emergencies.
I know we’re word people, but honing in on numbers as you tackle your career finances will hopefully be empowering and set you up for financial success.
Want more? Listen to the WriterSpark Podcast where Melissa chats with Kelsey Browning.
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