Monday, April 2, 2012

Guest Post: Budgeting and the Writer

Sorry I've been AWOL, folks. I've been a bear in her writing cave, attacking all who come near (so, in short, having a pretty awesome time!). As promised in my last post, though, my husband, the amazing Travis Bach, has written a guest post for me about what it's like to actually support a family when 1/2 of the money comes from a writer (a topic that he has a lot of hands on experience with, seeing as he keeps all our books). So, without further ado, here's Travis!

Writing Financials, a Guest Post by Travis Bach

Since Rachel has recently posted about writer money, I wanted to take this opportunity to try and guest post it up. I'm not a professional writer, but I do have to be the one who looks at the money and figures out how to make it work. I'd like to share some of the planning and tactics we've been using to keep the lights on even though author money is less like a cash flow and more like a cash glacier that drops big cash ice blocks off at irregular intervals.

#1 - Know thy self...Financially
We've spent a lot of time analyzing our spending habits. This is typically done using tools like, but I used to have just a spreadsheet for it. is way nicer than a spreadsheet by the way and will save so many hours of work its not funny. There's some competitors to mint out there as well, like quicken online and such. I encourage you to explore, as these are powerful tools that should not be ignored.

This step is essential. You cannot plan if you do not know how much you  spend regularly. If you've never done this step, it might be an eye opener and a little painful. Sometimes we waste amazing amounts of money on things we've never thought of. Also, you'd be amazed at how many weird automated payments can slip through the cracks and hang around for years sucking up cash.

This item is #1 for a good reason. Keeping an eye on the money is vital and simply paying more attention will often reveal what courses of action are available to you. If you do nothing else, do this on a frequent basis.

By the way - if you are afraid to look at your bank statements... Count that feeling as a massive alarm bell. You need to get in there now. Face that fear!

#2 - Budgeting
For us, we have to dole out large sums of money (RA NOTE: all those big checks I talked about in the last post) carefully over long periods of time. By far the majority of my efforts on this simply are looking at what we're spending and how fast is the money going. Making a budget is key, but there's so much advice out there that there's no point in me covering the basics of that here.

However, estimating incidentals is the hardest part of planning. The expense events that are not part of the budget. Things like medical bills, car repairs, home maintenance, fines, fees, etc... Having done this for a few years I know to plan for about $1100/month (~$13,000/yr actually divided by 12) in incidentals.

How did I get that number? By looking at my historic spending summaries at and using Bank of America's online equivalent (since it had a lot more historical data for me). I look at total budget overruns (total spent - budgeted expenses) over several years and generally a 'safe' number emerges for me to use.

In addition to estimating incidentals, we maintain an emergency savings fund that can keep us afloat for 3 months with no money coming in at all. Any good financial planner or personal finance website will tell you how important this is. When talking about incidentals, its vital. The savings fund prevents us from having to use debt to cover short-term financial gaps or emergencies and, thus, not having to pay more for those incidents.

When the emergency fund gets low, we know its time to start cutting back and finding ways of getting money flowing into it for replenishment. Its a good, practical, and empirical measurement of the reality of that year's incidentals; rather than just my predictions.

#3 - Handling Large Blocks of Income
The chief challenge we have to deal with is the payment schedule. Rachel isn't getting a monthly paycheck for writing. She gets a few checks through her agent throughout the year. Knowing our budget requirements though, I can look at each check and see how many months of operations that check represents. When I look at our savings account, I know about how long we've got before something has to change (more on this later).

I also keep an eye on how many book payments are yet to be made and when those might be coming in. Forecasting like this is very important as its much easier to cut spending over the course of many months than over just a couple (or one). Cutting $200/month for 10 months is easy. Cutting $2000 from one month is hell.

Early detection of fiscal difficulties prevents us from getting blind sided. It also makes it so that I can more easily spot the ramifications of incidental expenses that pop up without warning (car breaking down, etc.). When that big, unexpected, whatever bill comes in, I know which way to jump and what it means for the future (i.e. next 12 months)

Also of note, we keep all the writing money in its own separate savings account so that it doesn't get eaten by accident. Having a lean checking account helps create the proper feelings of wealthy/poor as the monthly cycle repeats itself. I will say with certainty that putting lots of money into a pile that's connected to a debit card will result in that pile getting spent much faster than desired and on little, meaningless things.

We always strive to make the spending of the writing money a deliberate and planned act. Money, writing or otherwise, is earned through great effort, so its spending should always receive careful attention.

#3 - Using Milestones
I try to always have a plan for the next 12 to 18 months. Currently I have a rough idea of what's going down through 2013 (this planning might be its own post, it's a lot). There's a lot of assumptions going into that, planning on books yet unwritten and unsold. Fortunately, Rachel writes at a fairly reliable pace now, so its easier to guess what books will be written and when.

I have a spreadsheet on my desktop that I've used to calculate some numbers that are of vital interest to me and for Rachel's writing career, such as:

  • Amount of savings needed for 6 months of living on only my salary.
  • Amount of savings needed for 6 months of living without my salary.
  • Amount of savings needed for 6 months of living without any income.
  • Book sales to cash-in hand ratio. Ie.. if the publisher pays $X, how much comes home?* 
  • How much writing money is expected to come in over the next 6 months?
  • How much writing money is expected to come in over the next 12 months?
  • How much writing money is expected to come in over the next 18 months?
  • What's the threshold for me to quit my job?**
  • What's the threshold where Rachel has get work other than her own novels?

*This number is approximately 63% right now
**and become Rachel's full-time assistant/promoter/financial manager/product developer/GM/etc.... (RA NOTE: Slave, coffee boy, full time ego adjustment coach, etc...;D )

I tend to update this sheet once/twice a year. These milestones are important. They are indicators of future prosperity or trouble. All writing work takes months to pay out, so we have to look forward far enough to start damage control on time. I bet that Rachel could get contract writing work easily enough if needed. That said, getting a contract to write for hire, writing the book, editing the book, and getting paid for the book would take months and months and months. Much of that spent waiting on people.

It's these kinds of delays between need, effort, and payment that make planning so amazingly vital. If there's gonna be a problem in October, we need to be on the move in March.

The last thing I ever want to do is to use debt to cover a shortfall. Nothing like having money troubles and then having to pay 20%-50% extra to deal with them. Did you know the average small item put on a credit card winds up costing the owner triple what they would have paid? Yeah. Screw that.

So, in recap, my advice to folks would be to monitor, budget, and plan plan plan plan plan. Just like steering a big ship on a long voyage, its vital to constantly update your knowledge of your position and to make corrections early enough that the problems are small and fixable, rather than huge and crushing. Thank you for reading and I hope this helps shed more life on living as (or with) a working writer!

- Travis Bach (AKA, the real Slorn)

1 comment:

Nancy said...

Thanks for taking the time to write that, Travis. It was very interesting and boy-oh-boy are you right about debt to cover a short-term short-fall. That's a recipe for long-term disaster. Doing without for a little while really is less hard than doing without for what seems like forever while you pay back triple what you couldn't figure out how to do without before!