When I left my day job in 2011 to become a full-time author-entrepreneur, I had six months worth of savings in the bank and I told my husband that if I couldn't make it work, I'd go back to the day job. I've never gone back, but I've definitely had to learn how to make – and keep – money along the way.
In today's article, Jaren Nichols from ZipBooks gives some money management tips.
Getting paid to write is a dream job. You set your own schedule, pull on your comfiest pants, and crack open your laptop anywhere from your favorite bookstore to the beach—all while doing something you love.
Less dreamy, however, is dealing with the financial side. Most creative types are more interested in honing their craft than bookkeeping—but making a good living as an author or freelance writer depends on more than just your wordsmithing.
Whether writing is your side-hustle or full-time gig, managing money well is what will keep you in business.
As an entrepreneur running ZipBooks, I’ve learned a thing or two about personal and business finances. You focus on publishing your next novel, and I’ll try to help out with the financial side.
Below I’ve outlined money management skills essential to a thriving writing business.
Set Earning Goals
As a writer, you are a business. Granted, a small one — but the best businesses make and track financial goals.
Make a plan for how you intend to spend your writing income:
- Do you depend on it to pay the bills? Make a personal budget that accounts for all monthly expenses, including rent, groceries, bills, entertainment, etc. To get organized, you can go old school with pen and paper or a spreadsheet, or simplify things with an online tool like You Need a Budget.
- Do you have an additional income stream? If so, your side gig may contribute to the household bills—or go toward for a big purchase, such as a home or family vacation. You may want to invest your money, or use it to fund your own future full-time writing business.
Based on your expectations, come up with an exact number you want to earn over the next quarter. Be realistic—but don’t be afraid to stretch yourself.
Calculate your current income from your projects and clients, and determine how much more you need to take on to meet your goal. Evaluate your actual and desired earnings every few months, and adjust as necessary.
Give Yourself a Paycheck
Use both a personal and business checking account. Send your earnings to the business account (and pay any expenses from it), and draw a regular personal “paycheck” from it every few weeks.
One challenge writers face is inconsistent earnings—instead of receiving a predetermined amount every other week, your monthly earnings will bounce from barely anything to huge payouts.
Giving yourself a regular paycheck will keep you afloat when times are lean and rein in the spending after a big payout.
Another way to avoid falling behind is to create an emergency fund—set aside $5,000 or so and commit to touch it only during dry spells, and fill it back up as soon as you can.
Keep track of the money you spend on your writing business. This includes any equipment—your laptop, printer ink, a chair for your home office, etc.—along with marketing, editors, website fees, and investments into improving your skills, such as books or writing courses.
You’ll be grateful for your thoroughness when you list your deductions during tax season.
Look for ways to cut back. The fewer expenses you have, the more profit you’ll earn—so instead of investing in a lavish home office or fancy website, reduce spending on office decor (or buy used) and shop for a cheaper (or free) web host. The easiest way to stay on top of your business expenses is to use an online expense manager, like the one we offer for free at ZipBooks.
Evaluating your earnings monthly will help you make sure you get paid on time for each project, follow up on outstanding invoices, determine if you need to raise your fees or find a higher-paying client, or do a marketing push.
Pay Taxes Quarterly
Don’t wait until April 14. As an independent contractor, taxes won’t be automatically withheld from your payments—but you’ll still need to pay up come spring.
If you don’t plan ahead, you might not have enough to cover bills and pay Uncle Sam.
Set aside 30% each month for taxes. You may start making quarterly payments toward your annual tax bill—the payments are based on an estimate of your annual earnings, and when the official amount is totaled at the end of the year and you submit your taxes, you’ll either have more to pay or get a refund.
Maximize Your Time
Good businesses focus only on activities that earn the most money. You should do the same.
Are there any less lucrative tasks you can cut or outsource? It might be cheaper to pay someone else to transcribe interviews, for example, or to proofread your chapters. Check out Upwork to find potential help at an affordable price.
If you have a low-paying client, it might be worth it to drop them and spend the time instead looking for a better-paying opportunity.
If you can start to implement each of these tips, I’m confident your business and financial life will be better than it ever has been!
Even though you’re a writer, don’t forget that you’re also an entrepreneur and businessperson — so make sure you manage your money like one!
Do you use any of these money management strategies? Please leave your thoughts below and join the conversation.
Jaren Nichols is Chief Operating Officer at ZipBooks Online Accounting Software. Jaren was previously a Product Manager at Google and holds an MBA from Harvard Business School.
[ Note from Joanna: If you want to know more about the business side of being an author, check out my book: Business for Authors: How to be an Author Entrepreneur. ]