Adjusting To Being A Full-Time Author – Part 2

In this second installment of my musings about moving from a full-time day job to writing for a living, let's take a look at some of the financial issues you need to be aware of in the rapidly evolving industry of self-publishing…

Keep The Faith, But Don't Count On Next Month's Income

Between February and August 2011, I made a ton of money, around $105,000, from my book royalties. Not like the big authors, but more than the "modest car payment" amount I'd been making before from month to month. I had stars in my eyes and money burning a big hole in my pocket. We already had some hefty financial obligations (I'd been a well-paid federal employee, remember, and had the payments to go with it), and made some financial decisions based on "projections" that, in hindsight, maybe weren't such a good idea.

Because in September, a month after I left NSA, sales took a nosedive after Amazon (which is where I get over 95% of my royalties) apparently changed some of its algorithms. The royalties for that month were about $7,000. Yes, that's a lot of money to a lot of people, but in terms of our existing financial commitments, that was not good at all. Even if Amazon hadn't changed anything, eventually your bestsellers are going to drop off the list. Otherwise, there wouldn't be any books in the top 100 except King, Koontz, and Patterson, right?

Another thing to keep in mind is that your royalty payments from Amazon and other retailers don't have any tax withheld. So don't forget that little gotcha. I'd also strongly recommend that, at least for your first year, you find a good tax consultant. You'll be able to write off a lot of expenses for your business, but you'll also have to pay some other things, like self-employment tax. A consultant can help you wade through all that stuff.

The silver lining, such as it was, is that Amazon pays on a net 60 basis. This means that the royalties you make in a given month are actually paid to you two months later. Some people complain about that, but to me that's a financial safety net. If your royalties in a particular month suck, you've got two months to prepare for the hit. And that's what we did, battening down our financial hatches and stocking up on mac & cheese for dinner.

But the hit didn't end with low royalties in September: October and November were even worse. I was seriously contemplating going back to work (probably as a contractor working for the government, as we'd all starve to death by the time NSA's hiring process churned me back into the fold) and was getting really agitated and depressed. Sure, it wasn't like we were out of money or were going to starve. But after three months of this, I was getting really discouraged.

After a lot of soul-searching and talking to my wife, I decided I was just going to persevere. As I mentioned, it's not like we didn't have any money, at least until April when the taxes would come due. I just had to keep the faith and push through.

Sure enough, sales turned back up in December. It wasn't the kind of windfall we'd experienced over the summer, but were about double what we'd made in the slow months. And this month, January 2012, has been even better. Okay, I told myself. I can do this. Chugga-chugga.

That brings me to the moral of this part of our little story. If I had things to do over, the very first thing I'd do with my royalties when they took off is save the money away. Build a big-ass financial cushion (post-tax, remember). I'd put away enough post-tax money to keep us afloat without eating mac & cheese every night for at least six months.

Why six months? Because if you're writing full-time, you should be able to produce at least one new book in that time, and quite possibly two, along with short stories, etc. So, if your current list tanks, you'll still be able to eat while you're working on that new book.

Note that if you think you can only write one book a year full-time, you're probably going to need supplemental income unless you really strike it rich (which is a factor of luck, not planning, unless you've already got a large, established readership). This business is literally a publish or perish affair, and survival favors those who are more productive.

Another thing: I wouldn't seriously consider leaving your day job to write full-time until you have a backlist of at least half a dozen titles. You may have a whopper of a bestseller like SEASON OF THE HARVEST was early on, but what goes up will inevitably come down. It's only a question of hang time on the charts. But if you have a bunch of books in your list, they'll sit there and quietly continue to earn money, even if they're not on the bestseller lists anymore, and each new book you put out will pull in more income.

But do NOT base your expectations on the current performance of any single book, or you will likely find yourself jumping off the diving board into an empty pool.

The other thing is just to keep the faith. It's hard. But as Thomas Edison once said, "Many of life's failures are people who did not realize how close they were to success when they gave up." Just build a healthy money reserve before you strike out on your own, be smart, and then write your butt off.

In part 3 we'll cover The Virtue of Self-Discipline…

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