The Nitty Gritties Writing and Money

I think about money a lot. I don't think this will come as a surprise to anyone. I mean, the main character in my series is a thief whose main goal in life is to earn a million gold bounty, so clearly money interests me. Admitting this interest, however, is sort of like admitting I have an embarrassing personal grooming habit, because money is one of the few remaining things you do not talk about in polite society.

The older I get though, the more I realize that this aversion is a huge disservice. Few things can ruin your life faster or more completely than money. This is especially true for writers who, as John Scalzi points out in his own excellent post about writers and money, seem to be unusually and universally bad at dealing with money. This (admittedly anecdotal) failing is further aggravated by the byzantine feast-and-famine nature of writing money combined with the fact that most new writers have no idea what to expect when they sell their first book because, you know, people don't talk about it.

Thankfully, though, this is no longer totally true. While it can still be pretty hard to get an accurate picture of what to expect money-wise as a writer, both in terms of amounts and how money actually comes in (both of which I consider pretty vital information if you're looking to make publishing your new career), a few brave souls have bucked convention by sharing their own experiences. Today I'm throwing my had into the ring as well, so if you've ever wondered about the nitty gritty of just how authors make their money, or if it's possible to make a living writing, keep reading! We're about to talk about the Benjamins (or, you know, your denomination of choice).

Disclaimer!
First up, I should clarify that everything I'm about to say comes strictly from my own experience and things I've heard directly from other writers. Likewise, the links I post are from other writers posting their own findings/experiences/opinions. Writers are contract workers. You write a book, you get a check. To further complicate things, writing contracts vary wildly between publishing houses and even between authors within the same house. Because of all these variables, no two writers get paid exactly the same, so please please PLEASE don't make your life plans off what I say here, and never ever ever make tax decisions based on what you read off the internet.

I repeat, I'm writing this article based of what I know from what happened to me and links I found helpful. The information/numbers/etc you see here are purely for informational purposes. You will almost certainly have a totally different experience in your own writing career, so always keep your eyes on your own money and explore all your options before committing to a path of action. (IE: please for the love of little kittens don't sue me for lost wages/accountant fees because you quit your job/got audited after reading this blog post.) I am neither a financial adviser nor an accountant, so take everything I say with that grain of salt firmly in mind.

Also, as mentioned, I link to a lot of people in this post. Many of these links are resources I used a ton when I was first figuring out this business worked, and I want to take a moment to thank every one of these writers for their efforts. Seriously, read the links. The information is priceless.

How Do Writers Get Paid?
Not enough! *rim shot* Seriously, though, most writers with publishing contracts get paid in checks through the mail. If you don't have an agent, this check comes straight to you. If your contract was negotiated by an agent, the publishing house will send the check to them and the agent, in turn, will take their 15% off the top and send another check to you for the remainder. This means there will be days when you open your mailbox and find a check for thousands of dollars. (More on the dangers of this later).

Wait? They just send you a check? For what?
Many things! But primarily, checks fall into one of three categories: advance payments, royalties, and rights sales.

The Advance - When you hear that an author "sold their book for a million dollars," you need to understand that the word 'sold' isn't entirely accurate. Author and publisher did not meet in some back alley and exchange a book for a briefcase full of cash. Instead, what this saying means is that the author (or most likely the author's agent) made a deal with a publisher allowing the house to publish their work, and in return, the publishing house pays the author an advance on future royalties. These payments are generally broken up into several installments, such as a third when the contract is signed, a third when the book is turned in, and a third when the book hits shelves. This money is exactly what it sounds like, an ADVANCE on future earnings. You never have to pay it back, but you won't see any more money off your book until you've earned enough in royalties to cover what the publisher has already advanced to you.
Confused? I don't blame you. It's a crazy system. Fortunately, author Rebecca Brandewyne wrote an absolutely amazing breakdown of how advances work already! I even learned things I didn't know, so I totally suggest taking a few minutes to read it.

So how much can you expect to get in advance for your book? Well, this also varies wildly depending on the size of your publisher and how many books the deal is for, but here's a few surveys to give you a general idea:

• Meghan Ward's Author Advance Survey - Very detailed breakdown and lots of graphs, though the wide spread of genres represented (fiction, non-fiction, memoir, etc) makes me worried. Still, a fantastic survey and very well done.
• Tobias Buckell's Author Advance Survey - THE survey for SF/F authors (I participated!). A great resource for anyone looking to get published in fantasy/sci fi.

Finally, there are some (mostly ebook) publishers who don't pay advances at all, but instead offer a much larger royalty cut. The erotica publisher Ellora's Cave, for example, pays no advance but offers a 34% royalty rate on all sales and pays monthly based on your sales. This method of payment means you potentially need to sell far fewer books in order to make a living and you never have to worry about failing to earn out an advance (more on that below). It's definitely an attractive method! 

A while ago, author Brenda Hiatt did a survey to determine average earnings for Romance publishers, including the e-publishers like EC who use this method. Her results, called Show Me The Money are invaluable for getting an idea of how much money you can expect to make from a romance, especially an e-pub erotic romance through one of the big e-publishers.

Royalties - This is the real way authors make money, the thing the advance is an advance of. A royalty is the money the author gets every time their book is sold, usually a percent of the cover price, For example, I  get 8% of each paper Eli book sold, though the actual amount of money I receive varies enormously depending on a huge number of factors. For example, by my contract I get different royalty rates based on format (paper or ebook), country where the books sold, and where the book was sold (since royalties are calculated off cover price, you get more money when your book sells at a higher price point, say from an independent bookstore, than when it sells from a discount retailer like WalMart). If you want to know more about the specifics, here is an extremely excellent breakdown of how royalties get paid from Romance author Sabrina Jeffries (this post talks Romance exclusively, but the same idea exists throughout publishing. Also, Ms. Jeffries has tables and graphs, and we all know how much Rachel loves tables!)

Royalty statements come out from publishers twice a year, and the numbers can be kind of disheartening. I'm not quite brave enough to put up my royalty statements yet, but fortunately for me Lynn Viehl (whose Paperback Writer blog was my shrine for many years) stepped up to the plate and posted the royalty statement for her NYT bestselling book Twilight Fall. So if you want to see the down and dirty numbers behind a bestseller, go have a look. She also has a followup post about how much money she actually took home, totally worth your time.

Rights - The right to publish your book is only one of the things you can sell. Other rights include audiobook rights, foreign translation rights, and even the coveted film rights (ask Suzanne Collins about that one!). Rights money can keep coming in even years after your book is published as your book slowly moves into other languages and formats. Depending on your contract, you'll sometimes get surprise checks for these (if you retained your rights) or the money will be applied toward earning out your advance (if your publisher holds you rights).

In my case, the deal my agent negotiated with Orbit gave them my world rights in return for a larger advance that was enough to let me quit my job and write full time. This means that Orbit now owns pretty much everything except my media rights like film, and when they sell these rights, like just recently when a publisher in Germany bought the right to publish Eli in German, Orbit gets the money, not me. HOWEVER! I am totally cool with that. True, I could have possibly made more selling the rights myself, but then I wouldn't have been able to quit my job. More than fair trade in my mind.

This is just an example of how publishing contracts can get very, very complicated. If any of you were grumbling at the sentence above where I mentioned the check goes to the agent first for their 15% cut, well, this is what that 15% pays for. Your agent makes sure you get the best contract and that you understand the contract you are signing. They are worth their weight in gold, and considering the price of gold these days, 15% is getting off cheap.

I leave all rights worrying to my agent, but if you're the sort of on the ball person who likes to be informed (yay for you!), here's an excessively detailed list of what rights you can sell.

Living off Writing Money, Feast and Famine
Ok, so now we know what that check in your mailbox is for, what do you do with it? This is where the writing life takes a drastic detour from any other employment experience. Because of the nature of publish schedules (read: SLOW), it's not uncommon to get money in the mail for books that won't be coming out for a year or more (hence, why it is an "advance" because it's so far in advance). These checks come based on when you sign contracts, turn in manuscripts, or when your books hit the shelves, which means they come with no rhyme or reason and often in strange clumps. (I'm not the only writer who goes up and down! For more information, and graphs!, see Jim Hines' excellent series on writing income.)

For example, in 2010 I turned in 1 book, handed in edits for 2 books, and had 3 books hit the shelves. Each of these was a payment milestone, which means that many checks arrive in 2010. Toward the end of December, I had enough money sitting in my savings account to buy a new car flat our in cash. Not bad! But then, in 2011, because I only turned in 2 books that wouldn't be published until 2012, I did not get many checks. In fact, in 2011 I made about 1/4 what I made in 2010 even though I was writing the same books for the same publisher.

And this, friends, is where writers get themselves into trouble.

For all but the luckiest, writing money is a life of feast and famine. There will be years where you make more money than you ever thought you could from writing sword fights in your pajamas and years where you wonder if you're still employed. During the fat years when all that money is sitting in the bank, it can be very tempting to make large purchases or pay off the house or take a vacation or go to ComiCon (SO TEMPTING), but you can't. Because that money, that fat cow, has to last you through the lean years.

I can't speak for other countries, but the vast majority of America lives paycheck to paycheck. If you ever plan to live off writing money, you can not live check to check, because you have almost no control over when that check arrives. My publisher, Orbit, has always been very good about paying me promptly (have I mentioned how much I love my publisher?), but the writing world is full of horror stories about checks taking months, even years to arrive. And when the money is late, there's very little you can do. This can be very depressing. After all, the mortgage company doesn't care if the check was supposed to come. They want their money monthly, even if you're getting paid yearly.

So what can you do? Well, like our ancestors before us, writers have to plan. You have to know how much it costs you to live the life you like to live. You have to keep a close eye on how much money you've been paid, how much is still owing, and how much you need to bring in to keep from dipping into debt (the writer's worst enemy). Most important of all, though, you have to understand that only about half the money that comes in is actually yours.

Death and Taxes
One of the most useful pieces of advice about living as a writer I ever came across was this, save 50% of everything you get for taxes. This is not an exaggeration. From the moment you get your first real writing check, your days of getting refunds are over.

When an employer pays you a paycheck, they withhold all sorts of things, taxes, medicare, social security, as well as optional goodies like 401k contributions, health insurance, and so forth. Your publisher does none of this for you, and when tax day comes, it will be up to you to pony up all the money out of your own pocket. I have had tax bills upwards of $8,000, this is NOT FUN in the extreme, but there's nothing you can do about it other than save your money and get an accountant who understands your position.

Note of personal experience - get a good accountant. Your taxes are not a place to cut corners or be cheap. Take your time and do your legwork to make sure you're getting someone who 1) actually understands how the hell to file for an author, and 2) is willing to work with you to determine how best to shelter your income (incorporating, paying quarterly, etc.). I had a bad accountant my first year and I'm still paying for it. Learn from my fail, get a professional.

Of course, there are people who are plenty good at doing their own taxes, and if you happen to be one of these, more power to you. Still, unless you're a certified accountant yourself, I would still highly suggest paying for a professional the first year at least both to make sure it gets done right and to make sure you get all the deductions you can and that you have proper cause to claim them. The IRS loves auditing independent contractors.


TL:DR
Save half your income, make a budget, and hire an accountant.

Despite what conventional wisdom tells you, it's very possible to make a good living off writing, but, like writing itself, it takes time, discipline, and the ability to push forward no matter what. Over the years, my husband and I have worked out a good method for weathering the hard times on writing money by rearranging how we pay ourselves out of our savings, and he's actually going to be writing me a guest post on that very subject very soon.

In the meanwhile, though, I hope you enjoyed this very long, very linky post about writing and money. Please feel free to leave your own experiences/comments below!