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Wednesday, January 20, 2010

Financial Planning: Estimating Income

Salary is such a touchy subject, isn't it? People have no problem sharing intimate details of their lives, but money? No way.

Money, Money, Money
Photo by dborman

Writers experience the full spectrum of salaries. It's exciting, because there's a chance of earning a high income, but it's difficult to have a realistic idea of how much money you can make. Some published writers will make less than a thousand dollars this year while others will make millions.

How can we create an accurate five-year financial plan? A two-year plan? A plan for this year?

We can't. But we can research and come up with a tentative plan.

Here are a few questions to ask yourself:

1. How much do I want to earn from my writing this year?
2. How much do I want to earn annually five years from now?

I would not recommend answering 1. $1,000,000 and 2. $10,000,000. I'm not trying to stomp on your dreams because it may very well be in your future, but the vast majority of writers will not make this much money. Let's align our expectations with reality.

Your writing salary will depend on many factors, including your genre, publishing house, release month, marketing, number of books you write, and whether you have an agent or not.

If you are already published, you may have an idea of how much you can expect to make with each of your books and freelance projects. Then again, you may not. Writers may not see royalties from their books for more than a year. Unpublished writers are even less able to project income.

If you haven't been published yet, there are a few factors to consider when attempting to estimate your future income.

  • Do you know if the book you're writing would most likely be published in hardcover or as a trade paperback?

  • Do you know a typical advance and the royalty percentage offered to new authors with the publishers your book would most likely be contracted with?

  • Do you know the number of books you can write in a year? Will your publisher allow you to write that amount?

  • Do you plan on having an agent? Don't forget the agent's 15%.

  • As we discussed on Monday, taxes must be paid, and since you're self-employed, expect to pay through the nose.

Unfortunately, I can't give you salary figures for the different genres, nor can I list the advances and royalty percentages you can expect. However, there are two resources that can help. Brenda Hiatt's Show Me the Money is an excellent resource for writers. She gathers salary information from anonymous writers and breaks down typical numbers for various publishing houses.

Publishers Marketplace is another great resource. The full site costs $20/month and gives information on all of the book deals. No, you won't learn the exact amount an author was paid, but you will learn who the book sold to, if it was a good deal, and the agent who sold it. The free, condensed version, Publisher's Lunch, gives a daily snapshot of publishing news.

When you have a rough figure of possible income for your book, you can start estimating. If you're close to getting published, meaning agents and/or editors are routinely requesting your work or you're finalling in contests, estimate you will sell one book in the next twelve months. To come up with a five-year plan, you'll need to research the amount of books the publisher you're targeting will release by an author in a year. If most of their authors write one or two books annually, you can hope for the same.

Will the projected income from these books replace your current salary? If not, brainstorm other ways to earn money from your writing. Maybe you could publish novellas by e-publishing or submit articles to magazines? Write your ideas down and estimate the additional income they could add. No one is saying you have to pursue these options, but it's comforting to be prepared to make extra money during off times.

Join me on Friday for our final installment about financial planning: saving for the future.

21 comments:

  1. This is one area I really need to delve into more. I avoid it b/c numbers scare me, but it is important.
    ~ Wendy

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  2. What I'm learning is that -- even if your book sells in a pretty good deal, by the time you take out the agent fee of 20% (no complaints, it's well worth it!!) and then taxes of 30-35% ....

    oy, you only have about 45% of your sale. THEN they give you half up front and half in 18-24 months so it's like getting 22% one year and then 22% almost two years later.

    *sigh*

    I'm just saying ... don't quit your day job.

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  3. Too bad I can't even save a dime to make a dime...does that make sense? lol

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  4. Thanks again, Jill. I still need to look at the links from Monday!! I do use Publishers Marketplace.
    Have a great day!!

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  5. I need to spend some more time getting into the financial side of authoring. I just know I won't be giving up my day job for a while.

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  6. Good Morning!

    Wendy: It scares me too!

    Tess: Sigh. You're right. It's worth it, though!

    The Rejection Queen: Yes, it does make sense!

    Paul: Thanks!

    Elana: I hear you!

    Thanks so much for stopping by!

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  7. Jill, this is a very useful post. Thank you. I've just started trying to draw up some realistic numbers for the next year. You are awesome!

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  8. I missed your post on taxes, must head over there next. Though I think Canada is a little different as we can't right off mortgage payments, etc.

    I'm kind of chuckling at this Jill, partly because my head is so stuffed up and I can't think clearly, but just the concept of making money on my writing seems hilarious to me right now. So sad!

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  9. Great post, Jill. The reality of making a living as a writer is, well, grim. BUT it's not impossible. And don't forget that aspiring writers can write off any expenses used toward writing (internet, PM memberships, conference fees, travel to writing conferences, books purchased, etc) in your taxes. So, that might help offset the obscene taxes and your agent's cut.

    P.S.
    I'm still laughing about the comment you left for us today.

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  10. Regina: So good to hear from you! Way to plan!

    Eileen: Ha, ha! It does seem like an unattainable dream sometimes, doesn't it? But you know, I picture myself five years from now and I see both of us signing books at Nationals. Hold on to the dream!

    Lisa and Laura: And I'm still laughing at the poem! It summed up every twelve and thirteen year old perfectly. And good point on the deductions!

    Thanks so much for stopping by!

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  11. Thanks for the insights! I'm planning to self-publish. So, I don't expect much of anything in income. LOL Breaking even after taxes would be a success to me.

    I agree on Publisher's Marketplace being a good source for writers. Especially with all the changes coming. Like a lot of people I'm eager to what Apple's new e-reader will be like. And what kind of deal The Big 6 will strike with Apple. Will it really make that much difference if the tablet is $1,000?

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  12. Jill,
    You are so smart to handle this.
    Just YESTERDAY, a women's business organization called to ask if I would speak on the $$$ aspects of a writing business.

    I hemmed and hawed, then said, um, no, but I could speak and doing your job like your hair's on fire, the muse in all of us, and how to write memoirs.

    She said she'd get back to me!!!!!!!!!!!!!!!!!!

    LOL.
    Patti
    www.pattilacy.com/blog

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  13. Hi Jill -

    Excellent advice! I know people, who quit their day job to write - major disaster. They didn't do their research.

    Blessings,
    Susan :)

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  14. These are all good points. I don't think monitarily, (it's my downfall). I'll have to keep these things in mind for the future. Thanx Jill!

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  15. This is really good. Hiatt's website is great too.

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  16. Mary Anne: How exciting! With all of the different e-readers out there, I think books in e-form has become a player in publishing.

    Patti: How flattering for you! You know, next time they ask, just go for it! Isn't there a saying that if you don't know something, teach it? Best of luck!

    Susan R: Ouch! Well, at least nothing is permanent, right? They can always get another job.

    T. Anne: It's hard, sometimes, but it's important to keep money in mind. But, I think for most writers, everything falls into place at the right time.

    Jessica: Her site is a great resource!

    Thanks so much for stopping by!

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  17. I made $100 writing last year. :) I'm hoping to make a little more this year. :)

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  18. Sharon: That's about $100.00 more than I made! Ha! Ha! I'm hoping to make a little more, too!

    Thanks so much for stopping by!

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  19. By the way, use GPS jammer to block all spy devices in your room or at work.

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  20. This is certainly something I haven't spent much time considering. Definitely will from now on. Thanks for the info, Jill!

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  21. Angie: It's not the most exciting topic, but it is good to think about now and then!

    Thanks for stopping by!

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