How an Author should Think about Money

I have had a number of authors ask about career planning -- mainly, "What does that mean in real life?" Since I'm the guy who criticizes others for "talking about career planning" without really knowing "how to do career planning," I thought I should offer a description. Here are some practical thoughts for putting this to work in your own career...

An author and an agent start out by trying to get to know each other. Who are you? What's the platform you're bringing to the process? What are the big past events and accomplishments? What's important to you for the future? What do you want to do, and what changes do you need to make? Trying to get a quick overview of your writing life is a good first step. The goal is to try and create a career map, so that you can start to think about what you expect to happen in the next two years, the next five years, the next ten years. What plans are you making? Do those plans reflect your values? Do they match up with your life purpose? Does it maximize your strengths? As an agent, I'm not trying to get you to write some sort of overall purpose statement that you think is fun, but then stick in a drawer and forget about -- I'm trying to help you establish a workable plan you can use to move your writing career forward. So I'm very results-oriented. It's why I'll ask an author questions like "what person would you most like to learn from this year?" and "what single thing would you most like to purchase this year?" and "what obstacle is holding you back that you most want to overcome this year?" If we can talk through issues like this, we start to gain some clarity as to what you want to accomplish. 

So if you want to make career planning real in your own life, here is Step One: The very first thing I suggest an author do when thinking about establishing a career plan is to write down on paper what you define as "success." If you don't do this, you're always going to be wondering if you're successful, or if you're "successful enough." Define success for yourself -- is it hitting the New York Times list? Or just seeing your name in print? Is it making a certain amount of money? Or selling enough copies to get another deal? You see, everybody defines "success" differently, so you've got to figure out what success is to you in order to figure out if you're taking the right path. 

And no, in case you're wondering, I don't happen to think that "success" is the be-all and end-all of writing. In fact, I happen to think it can be a trap, because we're never going to be satisfied by this world. For most of us, we simply want the time and energy to be able to actually write down the stories we have in our heads, and the opportunity to share them with others. BUT...at the same time, most of the people I represent are either full-time writers or moving toward being full-time writers. So I think from a business standpoint, there is the sense that they need to figure out how they can make a decent living from this writing gig. So I tend to focus on the economics of a career plan. 

Step Two is to set a financial goal for the year. It's got to be something that is both livable (assuming you are a full-time writer) and reachable (so there's no setting a figure of "a million dollars this year"). Let's say, for someone just moving into full-time writing, they set a goal of $24,000 a year. Skinny, but a real wage. If you're farther along in your career, maybe the goal is $48,000 for the year. (I don't have up-to-date figures, but I know that in 2004, the average annual income for a full-time writer was only $31,000. If you're doing better than that, you should be filled with gratitude.)

Step Three is to figure out a real-world budget for yourself. What does it cost to live for a year? I'm always surprised at the number of organized and creative artists who basically don't know where their money goes, or what it costs to live each month. It's going to prove very tough to determine a writing salary if you don't know what your monthly costs are. So if you have that information, get it out. If you don't, sit down with your checkbook and figure out how much you need each month for housing, utilities, food, insurance, car payment, gas, retirement, taxes, tithe, etc. If your monthly expenditures exceed your financial goal for the year, something has to change -- either you need to make more money or you need to cut expenses. For all the financial advice you can get from books and experts, it still comes down to those two choices: You can either make more, or you can spend less. The goal here is to create a budget that matches your financial goal. (This is why most authors are married to someone with a "real job.")

In Step Four you break down your annual financial goal into monthly sections -- the writer who needs to earn $24k per year will need to average $2000 per month. The writer looking to make $48k will need to average $4000 per month. It's important that you have that figure in mind, since most Americans live on a monthly budget and pay their bills every 30 days. 

Step Five: I always remind authors of the MacGregor Formula for full time writing: 24m(s) + 4b = RJ

You've probably heard me talk about this before, but I'll translate: the writer needs to have the next 24 months of book contracts, and they need to add up to a regular salary [that's the 24m(s) part].

The writer also needs to have four books earning him or her income [books already earned out -- the 4b portion of the equation].

If they have those two aspects, they have a real job [RJ]. 

Still with me? So the author has figured out what a realistic annual salary is, Then he or she has has written it all down so that there is a two-year plan. 

Now comes the hard part -- in Step Six, you have to start adding up what you expect to earn on the writing you're doing, marking down the times you expect it to arrive. That's called a budgeting calendar, and it helps you figure out what you have coming in and what you might need to add. Let's say an author is expecting a royalty check in May, and has a book due in July. She expects a signing check in October, another royalty check due in November, and if she can complete her other contract in time, another payment due in December. So she simply takes out a calendar and writes down the dates and expected income. Once she has filled in all the numbers on the calendar, the author will have a pretty good feeling for how much she's going to make and when she's going to make it. 

In Step Seven, the author shifts his or her budget from a monthly system to a quarterly system. So in our $24k per year scenario, the author stops thinking in terms of "I need to earn $2000 this month," and starts thinking in terms of "I need to earn $6000 per quarter." The $48k-per-year author stops thinking about making $4000 per month and starts thinking about making $12,000 per quarter. That takes the immediate, "how-are-we-going-to-survive" pressure off. Writing income just doesn't arrive on a monthly basis; but it's very fair to assume a full-time writer can expect to earn a decent paycheck four times per year. So move your income into quarterly groups, lowering the pressure on yourself, and give yourself a better big-picture view of your budget. (And if you're reading this far, you should know that several authors have found this one step to be life-changing. No kidding.)

The conversation then becomes something like this: "I'm going to make $6000 this quarter. It's going to come from these three sources: my completion money, my royalty check, and those magazine articles I'm completing. And the money is going to go toward..." [again, part of having a budget is determining where the $$$ goes, not just how it comes in]. 

Are you still with me? I'm just trying to help the authors I represent see that we can create a realistic plan for making a living at this writing stuff, but it takes some planning. And no, not everybody needs this from their agent. Some authors just need a guy who can negotiate contracts, or who has the relationships with editors to sell books. And that's fine -- if you don't need this information, feel free to ignore it. 

And no, this doesn't always work. Unforeseen events can occur that foul up our plans. We can be too aggressive. Or we can get lazy and only get halfway done. But in the real world, this is what I think an author has to do if he or she is going to think about creating a writing budget and actually making a living at all of this. 

Comments

[Kimn Swenson Gollnick]

Thank you, Chip, for this encouraging and detailed post! We met at Mt. Hermon a few years ago when you learned about my collaboration as a co-author on _Getting Your Financial House in Order_ (B&H). Your advice here is clear and laden with common-sense. It's also a plan I can implement when I return to full-time freelance when I complete my MA in English in the spring. Thank you for generously sharing this step-by-step plan for budgeting and planning, for writers. I especially liked the suggestion to look at one's budget in quarters, which makes it an easier target to aim for but also coincides with quarterly tax payments for those who earn enough to pay self-employment taxes or must pay estimated income tax on a quarterly schedule. Excellent advice.

[Elisa]

Fabulous post. Every aspiring and published author needs to read this!

Thank you so much for taking the time.

[bryan a]

Thanks for this Chip, shows that you care.

[Christina Berry]

The last time I heard this was in your SPU workshop when I had NO "writerly" income. Very fun to think it through again as a published author.

To me, at this point, success will be to sell out the first printing of The Familiar Stranger and secure a second contract. :)

[Sharon A Lavy]

I have not yet qualified for your career planning classes. Thank you so much for sharing this information here.

God bless~~

[Bert Johnston]

Budgeting by the quarter is very practical advice, and it works on both sides of the budget. I'm blessed to have a regular retirement income and am not dependent on my writing, but I find that some significant expenses tend to come in quarterly or semi-annual doses.

[Rebecca Woodhead]

Thank you so much. I sat down with a pen and paper and went through it point by point. Now I have a full budget and financial plan.

This is, without doubt, the best post I have read from any agent.

Thank you. I know I already said that but it needs saying again.

Rebecca
www.rebeccawoodhead.com

[Robbie Iobst]

Thank you Chip! I have a long way to go to be a full-time writer, but my husband has asked several times, what does that look like financially anyway? I didn't know. Just sounded good. :0) Now, I can show him this post. :0)

[Linore Rose Burkard]

Fascinating title for a blog post! I couldn't wait to see what you had to say about this, Chip. Two pages of notes later, I am convinced that a) I must meet with the Lord to answer a couple of those wonderful questions, particularly now that there's been a change in what my publisher wants from me. And b) Meet with the hubby (the guy with the RJ) and mutually settle upon what I'll include in my career map for the next two years.
This was timely for me, as well as practical. Thanks so much.

[Judith Robl]

Thank you. Thank You! THANK YOU!!

[Lisa Jordan]

Terrific post! Thanks for giving us a clear step by step approach to career planning.

[Kimberley Payne]

I worked as a Career Counsellor for over 10 years and you're right on with this post!