As a working writer, how do I create a budget?
Several people read my Monday blog and asked me, “What does a writing budget look like?”
Here’s the basic idea…
1. The author sets a financial goal for the year. It’s got to be something that is livable (if the writer is attempting to make this a full-time job) and reachable (so there’s no setting a goal of “a bazillion dollars”). Let’s say, for someone just moving into full-time writing, the goal is $36,000 per year. Yeah, that’s pretty skinny, but at least it’s a real wage for most writers. So figure out how much you need to earn in a year from your writing.
2. I encourage an author to break that annual figure into monthly chunks — so in our example, the author’s goal is $3000 per month.
3. The next step is to add up what the author expects to earn on the writing they are doing. How much in contracts does she already have? What other writing does she know she’ll be doing and getting paid for? That will help her figure out how much money is coming in, and how much she needs to add. Let’s say an author has a royalty check coming in May, expects to have completion money on a book contract in July, and is expecting to sell a project in October. All you have to do is to figure out the amounts and write them onto your writing calendar. Nothing will give an author more clarity than hard numbers written down on a calendar — it’s a way of saying, “I’m making this… so now I need to work to make that.”
4. The obvious thing to do next is to match up dates and amounts. If you know you’re going to be working on a book in March/April/May, you can write down how much you’re making on that project. By looking at your calendar, you’ll see where the holes are that need to be filled with writing projects. And by looking at your budget, you’ll see how much you need to make in order to fill in the gaps.
5. And here’s an important step: The author should shift his or her budget from a monthly system to a quarterly system. So in our $36k-per-year scenario, the authors stops thinking in terms of “$3000-per-month” and starts thinking about “$9000-per-quarter.” That pushes off the immediate, “How-am-I-ever-going-to-survive” worry a bit. Writing income never arrives on a monthly basis anyway, though it’s fair for a writer to plan for a decent paycheck four times per year. So you move your income into quarterly groupings, lowering the pressure and giving yourself a better big-picture view of your budget. And the government already views your business this way, which is why they ask you to pay quarterly estimated taxes — the system is set up to have you do this.
6. The conversation then moves to something like this: “I’m going to make $9000 this quarter. It’s going to come from three sources — my completion money, my royalty check, and those magazine articles I’m completing or the editing projects I’ve got planned. And the money is going to go toward these things…” (because part of having a budget is determining where the money goes, not just where it will come from). Again, the government assumes you’re making money quarterly — that’s why they have you pay quarterly estimated taxes. So LOTS of writers and other self-employed people have based their budgets on this model over the years. Thinking quarterly will help you survive as a writer.
I hope this all makes sense. Oh, and I always remind authors of the MacGregor Formula for full-time writing: 24m(s)+4b=RJ (Let me translate that for you… If you intend to move toward a career as a full-time writer, you need to have the next 24 months of writing mapped out with enough money to equal a salary, PLUS the next four books contracted or planned. That will equal a “Real Job.” Once you’re there, you can consider quitting that day job and focus on your book career. If you’re not there, you want to be very careful about giving up guaranteed income. Making a living at writing is a tricky business.)
Yeah, this is a lot to choke down in one gulp. Feel free to ask questions if you need me to clarify.