Savvy Spending – Keeping an Eye on the Bottom Line
by Laura Drake
Last year I embarked on my new career as a debut author, but I didn’t leave behind the lessons I learned from my twenty-year stint as a Corporate CFO. I’ll need all those skills to manage my new career – and my author financial statement.
Don’t run! Stay with me – I promise not to make your eyes glaze over. But fair warning – I will use the ‘B’ word. Yes, I like to avoid budgets too. They tell me things I’d rather not hear.
But today’s reality is, advances are going down. Some publishers don’t offer them. Self-publishing? Even harder – the expenses come before the revenue. So unless you have a trust fund, or are writing as a hobby, you’ll want something to show for hard work you put into writing your book.
Not yet published? I’ve got tips for you too.
You don’t have to be an Excel nerd to make a budget. If Excel makes you queasy, know that a budget can be as simple as a running total, written on a napkin. We all can balance a checkbook, right?
All you have to remember is:
Revenue – Expenses = Profit
Authors have a fluctuating, hard-to-guess revenue stream. I recommend using another lesson I learned: conservatism. When in doubt, estimate low. The only revenue I can be sure of this year is my advances, so that’s the only revenue I’m putting in my budget. Anything above that is gravy!
Not yet published? Since you’ll have nothing on the revenue side of the equation, it’s even more important to keep a handle on expenses. You’ll need to decide (and perhaps obtain buy-in from a significant other) how much you’ll invest in your writing career this year.
Expenses are the discretionary part of the equation – which makes them the hard, dangerous part. Here are the steps:
- List the all ‘known’ expenses for the year
- Attending conferences?
- Designing and producing bookmarks and other swag?
- Buying advertising?
- Planning to enter any contests?
- Need new business cards?
- Be sure to include mileage expense; the per-mile reimbursement amount can be found on the IRS website (http://www.irs.gov/Tax-Professionals/Standard-Mileage-Rates.) Check it a couple of times a year – it fluctuates. Gas and maintenance on your vehicle aren’t just tax write-offs; they’re real costs to you.
- Research – everything from travel expenses to craft books; be sure to capture them all.
- Education – I always budget funds for classes, conferences, etc. If I’m not constantly improving, my revenue won’t increase!
- Office supplies
- Don’t forget quarterly and annual expenses: FF&P dues, local meeting fees.
- Prioritize your list. This is critical. Use money first for the things that mean the most to you.
- Then add 10% for ‘Miscellaneous.’ Unexpected expenses always come up. If you don’t end up using all this, it falls to the bottom line (a good thing) or it can be used for one more expense item on your list you didn’t think you could afford.
Because of my background, I look at things differently than most people. I start with a ‘zero balance’ budget – meaning I assume I won’t spend anything and every single dollar has to be justified from zero. Yes, I’m cheap. You don’t have to be that rigid.
All you need to be is a ‘conscious spender.’ Look at the potential for return on every dollar spent. Is the cost worthwhile?
Emotion vs. Logic
There are things you’re going to want. They’re not essential, but fall into the ‘nice to have’ category. How do you decide?
Try looking at this from a different point of view. For every dollar I spend, how many books do I have to sell to make up for the expense? If I would only need to sell a few books, I’m not taking much of a risk; if I’d have to sell hundreds, the risk of not getting a good result is much greater. If you’re not earning income from writing yet, this decision is even harder.
I’m not saying you shouldn’t spend money on the bright, shiny things. Some decisions don’t make financial sense. You work hard as a writer, and giving yourself a reward is a legitimate incentive.
Let’s say you’re considering entering your latest manuscript in a contest. The cost is $45 to enter. If you win, you get $50. From a financial standpoint, this level of risk makes no sense. But there are other benefits: you hope to get meaningful feedback from published authors. Or maybe you want to see how your WIP stacks up to the competition. You hope to have a request from an agent or editor if you win. Assess: what are the odds that you’ll get $45 of benefit (monetary or non-monetary) for your money?
One last point: A budget should be a living document. You can’t create one in January and forget about it until December. Lots of unforeseen things crop up, and if you don’t adjust accordingly, you’re going to have a heart attack at year end.
You can choose to do anything you’d like. But if you make your decision consciously, you’ll end up more satisfied in the long run.
Laura Drake is a city girl who never grew out of her tomboy ways, or a serious cowboy crush. She writes both Women’s Fiction and Romance.
She sold her Sweet on a Cowboy series, romances set in the world of professional bull riding, to Grand Central. The Sweet Spot (May 2013), Nothing Sweeter (Jan 2014) and Sweet on You (August 2014.)
Her ‘biker-chick’ novel, Her Road Home, sold to Harlequin’s Superromance line (August, 2013), and she recently signed a 3 book deal or three more books, set in the same small town.
This year Laura realized a lifelong dream of becoming a Texan and is currently working on her accent. She gave up the corporate CFO gig to write full time. She’s a wife, grandmother, and motorcycle chick in the remaining waking hours.