Business Musings: Writer Finances Versus The Paycheck World

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Here’s a piece of advice you don’t hear very often:

Pay off your house.

Seriously, my writer friends. If you get a lump sum of money, pay off your house.

Or your car.

Definitely pay off your credit cards, and take them out of your wallet. Use them only when you travel to a conference or plan to make a big purchase.

If the indie writers who made a lot of money in 2012-2014 had followed that advice, they’d still be writing and publishing. Sure, their incomes would still be down, along with their sales, but their careers would continue.

How do I know they didn’t do that?

Because they’re gone. Mark Coker commented on it in his year-end blog. Writers in the comment section on this blog have mentioned that they’re leaving the business. The Kindle Boards discuss all the writers no one hears from any more.

And if you go to writer website after writer website, many of them for successful indies, you’ll see sites that haven’t been updated for a year or two, or you won’t find any site at all.

What happened?

Well, those writers will say that their sales went down to unsustainable levels. Those writers will say there’s no point in continuing now that they can’t make the same kind of money they made in 2013. Those writers will say that writing, as a profession, is impossible.

And it is, if you don’t understand money management.

In January, I wrote a blog that went viral. The blog started out as a comment on the All Romance eBook disaster, and then went on to examine the business cycle that we’re a part of. I’ve received several reprint requests for the blog for writers in the print media, and many writing aggregate sites, including those in traditional publishing, linked to the blog.

Why? Oh, for a variety of reasons. Traditional publishing was happy that I said the indie gold rush was over. Writer publications liked the advice I gave about how to survive the upcoming changes. And a few business sites started keeping track of the various side businesses that are disappearing. (I noted a few in the last couple months, including Shelfie and Samhain, which keeps trying to hang on, and ultimately will not. Get out now, if you haven’t already.)

In that post, though, I quoted several times from a Harvard Business Review article from the 1980s which looked at the life cycle of a business. It lists five stages—Existence, Survival, Success, Take-Off, and Resource Maturity.

None of the writing businesses that started up in early days of the indie publishing boom ever made it past the Survival stage. You have to look at the article itself to see why I say this. Success in this model doesn’t mean short term success. Rather, it means something that can be sustained over time.

So, in the Survival stage of a business, here’s what the article’s authors, Neil C. Churchill and Virginia L. Lewis say about planning:

Systems development is minimal. Formal planning is, at best, cash forecasting. The major goal is still survival, and the owner is still synonymous with the business.

Cash forecasting. It sounds so easy. It isn’t.

A study conducted in 2015 by the FINRA Foundation, “quasi-government organization that regulates brokers and Wall Street,” found that two thirds of Americans couldn’t pass a basic financial literacy test, getting fewer than four questions right in a five-question test.

Fortune Magazine printed a short article analyzing the study (which surveyed 27,564 people over a five-month period of time). The article had this lovely sentence buried in the middle of it:

Worse, the percentage of those who can pass the test has fallen consistently since the financial crisis to 37% last year, from 42% in 2009.

You’d think, after a financial crisis that put millions out of work, cost hundreds of thousands of people their homes, and showed over and over again that even more people got scammed, that Americans would improve their own financial know-how.


I’ve been thinking about this because I’ve watched several friends who are not writers up close and personal lately. A couple of them are extremely good with money. One of them even says that they follow all the rules.

Those rules, by the way, say that you should maintain the best credit score possible and you should never ever pay off your mortgage, because—at least in America—you can use the mortgage tax deduction and it’ll be better for you than…oh, shit. This is where it breaks down for me. Because I have no clue how a tax deduction is better for a person than owning something outright. Especially something like your home. Shelter. The place you live.

But I’ve never had a traditional job (for long) or a traditional attitude (ever).

And therein lies the heart of this blog post.

Because if I had had a traditional attitude toward money, you would not be reading this blog. You would never have heard about me. My career would be over now.

Money management is a crucial part of running your own business, and in the Survival stage, it’s all about cash flow.

Cash flow, for those of you who don’t know (and in the U.S., I’m assuming that’s two-thirds of you reading this blog) is about the way money flows into a business and flows out of it. In a business, cash doesn’t arrive at predictable intervals or in predictable amounts—such as $2,000 every two weeks. Sometimes a business is lucky enough to have a predictable payment cycle (for example, Amazon KDP pays at the end of each month), but not a predictable amount.

Even when a young business has a predictable amount of money headed their way—say, a client who agrees to pay $1,000 every month until a bill is paid off—that client might pay $1,000 one month, and then pay the entire amount the next.

The problem is that the business might have planned for the $1,000 per month, but not the entire payment. That entire payment (let’s call it $4,000) might seem like a windfall, but it isn’t. Instead, it’s money that was expected and should have been used in the succeeding months.

How many writers would parse out that “extra” $3,000 at intervals of $1,000 per month? Not many.

Because most writers are trained to exist in a paycheck world. In a paycheck world, the income is regular and it is predictable. That $2,000 every two weeks comes magically if the work gets done. The boss pays you, and you can dole out the money to the people you owe. No guesswork, no worries (unless you have more debt than you have income).

But in the world of the business owner, particularly an owner in the Existence phase or Survival phase, the paycheck world does not exist. Nor do the rules of the paycheck world apply.

Let me give you a retail example: I live on the Oregon Coast. It has a summer season, in which hundreds of thousands of people descend on our little town for half of the month of June, all of July and August, and, to a lesser extent, the first few weeks of September.

Retailers here (and hotels and restaurants) make the bulk of their income in those few months. And with sad predictability, about half of the businesses that opened their doors for the first time in May will be closed by the following May.

Why? Because they didn’t think ahead. They thought the money earned in the summer would continue throughout November, December, and January. This winter, even the weekenders from the cities didn’t make it over the mountain to our little town because of extreme bad weather. But I can remember many Decembers in which local retailers had no Christmas business at all—except locals. We count, of course, but there are only 7,000 of us. Compared to July, when we can have as many as 150,000 people in town, 7,000 people barely register.

Writing is just like that. There are good months and bad months. Good years and bad years.

I’ve had years in which I earned one-quarter of what I earned the year before. If I didn’t know how to roll with those punches, I would never have survived this long as a freelancer.

How did I learn? Partly I learned because I never entered the paycheck world. Partly I learned because I’ve run businesses. And one of the things every new business owner learns is that what works in the paycheck world doesn’t work in the world of the self-employed.

I watched one of my friends deal with the fact that their credit score has gone down in the past few years due to some setbacks. Not that I would notice what this person considers a bad credit score. Their bad score is higher than any credit score I’ve ever had.

But the person is worried about losing perks given to people with stellar credit—lower interest rates on new loans, fewer credit card offers, lower insurance rates. I get it, in theory. But I’ve never experienced it. I’m used to paying more when I step into the paycheck world, and I do.

I really get annoyed when my paycheck friends refuse to do routine medical procedures because they got a new insurance plan and the co-pays for doctor visits are higher. I’ve paid my own way at the doctor for years, and I got excited after Obamacare kicked in because for the first time in my life, I could go to the doctor and not fork out at least $50 for the visit.

But I would still go to the doctor, even when I did have to fork out that $50, because without my health, I couldn’t work, and if I couldn’t work, I didn’t get paid, and if I didn’t get paid—well, you understand the death spiral. (Or, maybe only a third of you do. Seriously, that study has me somewhat terrified.)

The “good” advice you hear about finances is good only for paycheck people. Those of us running small businesses need security. The best way to get security is ownership.

If those writers who made boatloads of cash during the indie gold rush years of 2010 to 2013 or so had paid off their houses, bought new cars with the cash, and put a bunch of money in easily accessible savings (yes, with almost no interest), those writers would have weathered the decrease in income.

Think about it: If the writers had entered those years with a house payment of $1,000 (which, the Great God Internet tells me is an average mortgage payment in America), a car payment of $400, and credit card payments of $300, and then—as the money poured in—the writer paid off all of those things, the writer would have saved $1700 per month.

So that writer, by 2015, could get $1500 less per month than she did in 2014—and still be farther ahead financially than she was in 2011. (By paying $200 per month less in expenses.)

Instead, most of those indie writer who made a small fortune increased their expenses. I know of several writers who made millions and hired all of their friends, at the same salaries those people earned their other jobs. You can’t do that and have it sustain. I don’t care how much money you earn. All income is finite, and I guarantee you, someone who tries to share the wealth like that will always spend more than their expenses.

But even if the writer was frugal, chances are she never paid off her house. She probably leased a better car or maybe two better cars. She answered yes to credit card offers, and then used those credit cards for things like cruises and clothes—things she couldn’t afford before.

So when the bottom dropped out, she was probably in the same position she had been in when the gold rush began. Or maybe she’s paying a few hundred more per month than she did in those days.

But she isn’t financially better off.

Dean and I bought a new car last fall. New to us, that is. We paid cash for a car that was several years old but had less than 50,000 miles on it. Now we own two cars outright. We could have kept another car that we also owned outright, but the maintenance on that car was getting prohibitive. So we didn’t keep it. We sold it. What do two people need with three cars, anyway?

Those of you who’ve read the Freelancer’s Survival Guide know what I’m going to say next. Your job as a freelancer is a risky job. Do not do risky things with your finances.

When your income is irregular and unpredictable, living like a person with a paycheck is risky. You can’t guarantee that you’ll get enough money every month to cover that month’s bills. Some months you’ll get five times what you need. Some months you’ll get no money at all.

Imagine that, paycheck people. No money at all.

The writers who’ve survived the loss of the gold rush know how to manage money. Even better, they know how to manage the flow of money into and out of their business. And best of all, they understand they no longer live in a paycheck world.

They make choices based on how to sustain their freelancing, not on getting some good rating from a credit agency or saving money on taxes instead of providing security for their family. (Freelancers, by the way, rarely get tax refunds. If they do, they’re probably not handling their finances correctly in the first place.)

So, for those of you who are going to get windfalls this year—and many of you will—pay off things. Get rid of your credit card bills and keep those cards at home so you don’t charge them up again. Buy your car outright or find a good used model. Move to better (cheaper) housing. Maybe buy a house with cash. Put money away for a rainy day.

Or rather, a rainy year.

Because freelancing is all about the ups and downs. It’s rarely a straight line, and it’s never a straight line uphill.

Stop worrying about your credit score. Look at what you own that you can’t lose if the money decreases. If you don’t own much, then change the way you handle your personal finances.

Guaranteed that will help your writing much more than some Book Bub promotion or throwing thousands at a brand new cover for your indie-published book.

If you’re one of those people who would fail the financial literacy test, you have homework. Start learning how to manage your money, or you will lose your chance to be a career writer.

You won’t lose that chance because you’re bad at writing or storytelling. You’ll lose it because you’re bad at money management.

Which is sad—and happens more often than I want to say.

Occasionally people make fun of me for putting a donation button on my blog. Clearly, they say, I’m not making money on my writing because I ask for contributions to the nonfiction blog. That criticism got ramped up again when I started a Patreon account to support this blog.

Those people clearly don’t understand financial management. Every bit of writing I do needs to bring in some income. Writing for free on my blog is not long-term sustainable. I wrote nearly 7,000 words of blog posts today. If I wrote 7,000 words of fiction, I would make ten to twenty times (if not more) what I will make from this particular blog post—and that doesn’t include resale income or anything else.

So, I keep this blog going by asking for financial support. I don’t need much, because I enjoy writing this. But I need some to justify it to my balance sheet.

I’ve been a freelancer for that long, you see. Earning money per piece of writing is a habit I started at the age of 16. It’s not one I’ll abandon now.

All of you who have financially supported the blog over the years, thank you! And those of you who support it in other ways, thank you as well. It means a great deal to me.

I keep the blog free on my website so others can discover it, but you can help by sharing this blog with your writer friends.

If you can’t afford to donate, that’s fine. That’s the reason this blog is here for free rather than behind a pay wall.

If you feel like supporting the blog on an on-going basis, then please head to the Patreon page.

If you liked this post and want to show your one-time appreciation, the place to do that is PayPal. If you go that route, please include your email address in the notes section, so I can say thank you.

Which I am going to say right now. Thank you!

Click to go to PayPal.

“Business Musings: Writer Finances Versus The Paycheck World,” copyright © 2017 by Kristine Kathryn Rusch. Image at the top of the blog copyright © 2017 Can Stock Photo / fantasista


35 thoughts on “Business Musings: Writer Finances Versus The Paycheck World

  1. Thank you for this article. I love your take on paying a house off. My family is actually in a position to buy a house at the moment. I want to continue as a professional writer so we are going to buy a house outright or owe less than $10,000. I don’t want to give up my writing. If we got a middle of the road mortgage and the economy tanked my writing would go out the door. Thanks for the encouragement.

    PS I took the financial literature test. I got 5 out of 6. I miscalculated the compounding interest and the time frame for doubling the amount owed. Oh well, I was concerned I might fail. I suppose Dave Ramsey gets the credit for my score:)

  2. One of the best pieces of advice I’d heard oh so long ago when I thought becoming a writer was easy, was “don’t quit your day job.” Well, that’s frustrating, but makes sense as you don’t know when you’ll get your next paycheck as an author. The very next piece of advice was “Before! you quit your day job, get 1 year’s salary in the bank.” Not just one year’s worth of paychecks (after taxes) but one year’s GROSS salary. Because all those nice things like insurance that is partially paid by your employer, you’ll need to pay for out of your own pocket. Some said have two year’s worth in the bank, just to be safe before you jump off the cliff and hope for the best.

    I’m surprised when I read an article like this, because, to me, it feels like common sense. Pay off debt, don’t carry loans, don’t run up credit card debt. Those are all paycheck things that come just like a paycheck, regularly. Being debt free with money in the bank gives you piece of mind that if something goes wrong, you can still recover.

    I’ve also noticed several authors who hit big in the gold rush have disappeared. Some are still out there, putting out a book a month. I’ve had a couple friends unwillingly tossed into going full time as authors and I wish them well.

    For me, I’m still working my day job, so I haven’t put much thought into my writing ‘business’ side. I’m getting geared up for a big year on the writing side. I need to make plans to get the business side up and running as well. This year, I started from zero. I can only go up. I doubt I’ll be quitting my day job any time soon, but as long as I can pay some things off and put some money in the bank, it’ll be worth it. 🙂

    I say this each time I post, and I mean it, thank you for all you do on this blog.


  3. Kristine~ you are dead on. I stepped in the indie universe in mid-2013. I was dumb as a rock about digital, but determined this much: Every book I produced had to pay for itself. I’m a slow producer, but my books earn out and then some to take care of web design and maintenance, newsletters, internet, promotional $$, editors, cover artists and formatting svs. I pay cash for everything and have done for ten years. I am so not a best selling author. Moreover, I don’t want that glory because I don’t want the responsibility. My little writing nest is just right for me and fits my lifestyle. Writing is my day job. When I want to work…I write and publish. Otherwise, I’m playing Bingo, fishing or gardening. It is true there is market maturity. Also true that we see fewer downloads in promotions. I saw this trend in early 2016…and started beta testing smaller promotions, building my subscriber list. Our reading audience is still there. Reaching that audience and entertaining them is the heart of the matter. And where the $$$ is. The last time I drew a company paycheck was in 1978. Writing has paid my way since.

  4. For a business, financial folks tell you tell you to borrow. Leverage everything, use the cash to expand. Except . . . many (most) personal businesses can’t expand. You can’t hire someone else to do your writing for you. This should be the first clue that advice that applies to most businesses doesn’t apply to writers.

    A lot of personal finance folks say to buy the most expensive house you can, take the deductions, and in ten years even moderate inflation will make it a bargain. Except . . . the market turns down, or you are unemployed, or underemployed, or . . . and the debt kills you, because you don’t have the cash flow to cover it.

    When you don’t have debt, you don’t have to worry about generating cash flow to cover it. Just the cash flow for everything else, which is a heck of a lot smaller.

    The Koch brothers are much reviled for a lot of reasons, but one of their mantras is Avoid Debt. Does that mean their businesses don’t expand as quickly as others? Yes. It also means their businesses don’t fail during downturns. They long ago learned (and have never forgotten) this brutal truth: you can lay off or cut the salaries of your people in a downturn. The only way to ‘lay off’ your debt in a downturn is to go bankrupt.

    But sole proprietors in businesses like writing or solo consultancies can’t lay off employees. The choices are losing the house et al, or going bankrupt. They must therefore manage cash flow ruthlessly. When I was a solo consultant (and I went thru a full boom and bust cycle in the computing biz), we started with six months of paycheck-equivalent cash in the bank. Not in stocks. In an interest-bearing checking account. When the crunch hit, it was clear things were going to stay bad for a while, so we cut expenses ruthlessly. In the worst period, I went eight months with zero income – and we survived it with cash in the bank at the end. We survived because we had no credit card debt, no car payments, and medical coverage (and a small income) from my wife’s employer. What was supposedly six months of take-home pay was a helluva lot more because we’d gotten rid of most of our debt and didn’t take on any more.

    Cash flow. We managed our cash flow ruthlessly. And we could, because we had almost no debt.

    Unlike what you suggest, we did not pay off our house as soon as we could. My income was good, but was never enough to pay off the principal without cutting into the six months of banked take-home pay. So when we had surplus, we banked it. When the banked cash started pushing a year, we started putting other surpluses towards the longer term – some into paying off the house, some into the kids college fund, some into retirement funding, some into ordinary investments. When we bought cars, we paid cash. Then and now, we’d buy a car every five years, and keep each for ten years in alternation.

    But other folks’ mileage may vary. We had the advantage of 15 years of inflation while owning the same house, then refinancing for 15 years at 3%. Net result was a house payment of $500/month, while the folks who moved in next door were paying $1500. With our cash and non-retirement investments, we had the freedom to take the benefits of mortgage deduction while entailing very small risk. Yeah, our mileage varied.

    These days we’re in good shape. No debt, still living in the same paid-for house, still driving our up-to-ten-years-old cars. We’re using the ‘R’ word a lot, and when we finally do, I have two personal projects planned – learn to play the stand-up bass, and write.

  5. I’ve always been a freelancer, so a lot of the paycheck attitudes, such as the fact that grocery stores are always crowded at certain times of the month, because everybody gets their money at the same time, are incomprehensible to me.

    I recently was forced to enter the paycheck world, because I was offered a very good job which unfortunately was only available on a paycheck basis. A lot of people congratulate me that I finally found a “secure” job (which tells me a lot about how they viewed my previous work), but I find the whole paycheck experience baffling (e.g. I didn’t know that taxes, health insurance, etc… will be automatically deducted from my paycheck, since I never had that sort of job). And of course, I’ll keep up my freelance business (paycheck job is only part-time), in case the job vanishes.

    Regarding paying off mortgage, the idea of not paying it off is baffling to me, because here in Germany the standard advice is to pay off a mortgage as soon as you’re able. The whole attitude to home ownership is different anyway, since people usually stay in the first house they bought rather than move to a bigger one. Also there is less of a stigma attached to renting.

  6. What a great post! And, seriously, I don’t think this advice should apply only for self-employed or indie people. For the person upstream who felt it was better to keep the mortgage and invest money in the lottery, er, stockmarket, I have to wonder if he’s ever lost a significant amount of money in stocks. We have, and we certainly aren’t alone. Now we’re in a demographic (old) where it truly wouldn’t make sense not to own our home, our car, and (let’s get to the essentials) our piano. The assumption that a good job, one that easily pays the mortgage, will always be there, and that if it is lost there will be another the good job to take its place is, imo, risky and naive. There are certainly times when it might be better to rent–if one has to move frequently and doesn’t want to risk a real estate crash right when you need to sell–but for the most part, the sense of security of owning your home and car is enormous whether or not you’re a writer.

    1. Another lifelong paycheck person here … and I agree completely. Pay off the bank, then one can begin to pay oneself with that former mortgage payment. As we head toward retirement with no pension, it makes more and more sense.

  7. As a Norwegian living in France, this is one of those posts where I go, “wow, Americans are so strange…”
    I don’t even know what a credit score is. It’s like an indication of how good you are at spending money you don’t have, isn’t it?

    I try to take note of who gives me financial advice and what their end game would be if they were me. For example, when I took up a loan to buy a house, we went for the bare minimum. The woman at the bank insisted we should loan an extra 100,000 euro and invest it. I thought, okay, I’ll look into it, so I put the data into a simple Excel sheet at home. And sure enough, it would become a good investment…in about 20 years. I don’t need money in 20 years, it’s right now I’m at my maximum when it comes to spending. The woman who gave this wonderful advice clearly aimed to be at her richest when she died of old age. (Or, she didn’t realize she was sitting across from two engineers with masters diplomas in industrial mathematics who would actually check the numbers, and was used to giving advice that benefitted the bank, not the customer, who knows…)

    I’ve had a regular paycheck for almost fifteen years, yet I have pretty much the same attitude toward money as you, Kris. The less debts I have, the happier I am (we’ll finish off the last of the mortgage in six months, yay!).

    1. It’s more of a track record of paying back money one has borrowed. To build a credit score, one needs to take out a loan or credit card, and pay it back faithfully over time. As one does that, the credit score goes up. Even small loans help – it’s the record of paying back that is the key, not so much the amount paid back.

  8. I published my first novel in 2013, and with so much to learn, I totally missed the gold rush. As I was reading this blog and the comments, I seemed to remember that even then there were those predicting the mass exodus from indie publishing when the gold rush was over. I probably read it here, since I was fortunate enough to discover your blog early on.

    I want to thank you for your continuing efforts to educate writers, especially me. I filled out my Schedule C yesterday, and for the first time, I made a profit from my writing. Not a huge profit, mind you, but any profit was cause for celebration in my book. I’ve felt like I’ve been scrabbling a lot of the time over the past four years, but each year has been a slow but steady improvement. And I’m still writing and intend to keep writing in the future.

  9. Kris,

    I learned about this when I was working on the Pacific Options Exchange in the late 90s. I saw people living way beyond their means, who’d bought the most expensive house and boat and…lost everything in the crash.

    Having been raised poor and working class, I shook my head. Who needed the huge house and boat anyway? Having always worked strange jobs to make time for writing and other things, I was never in the dependent on a regular check world, and used to living lean.

    When I decided to make my recent shift from writing (trad published) non-fiction and teaching, into writing fiction, one thing I did was look at writers who’d successfully transitioned to making a living writing fiction full time in the last 5 years. Every one of them had downsized, paid off what they could, and slashed expenses first.

    I took that lesson to heart, and my family and I moved accordingly. We’ll see how the next few years go.

    1. Addendum: several people told us we were dumb to pay off our house when we moved from most-expensive to cheaper city. That it wasn’t sound investing. We should leverage our house and buy rental properties instead. We did not listen.

  10. So true. No financial advisor I’ve ever talked to has approved of my paying off my mortgage instead of putting the money in the stock market, but in years when both the stock market and my income tanked, I have been very happy with my choice. Actually, I’m happy with it during other years as well. Now that my mortgage is paid off, I get to do the two other things I love doing most with my money: putting it in savings and retirement.

  11. My website has’t been updated in a long while, but not because I’m leaving the business of selling my novels; it’s because the site is FULL, and I’m sporadically working on a shorter mobile friendly version. Check back in the fall, if that little endeavor fails LOL. That’s when my site provider will want a renewal.

  12. This is a great post. We try to maintain an emergency fund of six-months of our living expenses. We own our cars. While we do use our credit cards and don’t have the house paid off yet, we live BELOW what my husband makes so that we can dedicate some of it to debt retirement (my husband will tell anyone who asks he owns the oldest car in the doctors’ parking lot).

    Understand my husband has a paycheck that he’s gotten since 1995 but we don’t take it for granted. My goal is to get my writing income to the point I can help out with some of this debt retirement. It’s not there yet but as my husband says, it’s a long-term investment.

    Good stuff here, Kris. I forwarded it to Don. Thanks for sharing.

  13. Kris — Great post. It’s not a one-size-fits-all thing, but the basic premise is sound. Because we straddled both worlds (paycheck and freelance), there was a crossover for us. One of the things we learned was that even with one freelancer, the normal rules didn’t apply. Every time we followed the conventional wisdom, we got stung. And every time we operated outside the norm, things evened out.

    What really helped us, though was this. We generally put all income into one account — windfalls and all. We pay ourselves our monthly budget into a separate account out of the main one. No matter how much was in the holding account and IRAs. When we did have cars, mostly we paid cash (or paid the car off quickly). If we hadn’t, we would be way worse off. The trick for us always has been to pretend that the money in that main account didn’t exist — except when it came time for the monthly stipend.

    Also, we always had health insurance. Mostly from my day job. In the long run, that saved us money because we each had a major health event when we were in our 40s and 50s.

    Our takeaway is that even with one freelancer in the mix, it was best to act as if all income was freelance. Considering that in 2008-2010 many saw their straight jobs disappear (including ours), it was a strategy that paid off.

  14. Why not pay off the mortgage? Let’s see: mortgage interest 3.25%. Invested cash, give or take return is 8% Umm, hello?

    By the way “mortgage tax deduction” is an income deduction not a tax credit. Even at my income that means that a $1000 in interest still costs me about $700.

    1. Clearly you’ve never freelanced. Because you’re assuming there’s always money. Sometimes freelancers don’t get paid for months. Then what? If your mortgage is paid off, you don’t have to worry about that $1,000 payment. You have shelter. You can continue to do your art.

      However, if you don’t have enough savings to last for months with no money (or not enough), then you’ll need to get a job. If you can.

      Your thinking here is day job thinking. And that’s what this blog is about.

    2. I don’t know where George has been living for the last 8-10 years, but we have money in retirement accounts and haven’t seen 8% gain since … I can’t remember when. On the other hand, 8% losses, oh yeah, familiar with those.

  15. This reminds me of people who win the lottery with enough money, if managed correctly, to last them the rest of their lives, but who are back working a few years later. With full knowledge in advance that the money is finite, they still spend it all.

    Something else people should remember is jobs and their paychecks are not forever. I learned this the hard way when I was laid off my good paying job at 60, and never found another one. I’m living a very different life now than I had anticipated, on much less money.

    Thanks for all you do, Kris. I support you when I can by buying your books, especially the business ones and am busy doing the learning I should have done years ago. Never too late!

  16. Excellent post, Kris. I started a small business a dozen years ago – and learned a lot of painful lessons the hard way. I’m still at it by a combination of luck, hard work, and fast learning. One reason I did not put out a book last year, though it was completed, was cashflow. I took five weeks off to go to Kenya for research and needed to take some personal time off for family. I knew early that the dollars rolling in would be down.

    My business runs on a two week cycle – at best. Quite literally, I have no work after March 3 on my schedule. I expect that to change, and I’ll bust my butt to make it happen, but the reality is that 2008 can happen again. I went from a record year in progress to no work for a month. None. I learned.

    The house isn’t paid off yet, but getting closer. Cars are owned outright. A year’s cash in savings, two months in cash, real bills, at home in a safe. Major purchases are in cash whenever possible.

    I’ll take risks with my writing. With my finances, call me a coward – I’ll play that safe.

  17. Back in the boom, I couldn’t sell anything due to my sheer ignorance, and now I’m rather glad of that. If I had been successful more quickly, I wouldn’t really have really learned anything about this business. (I still have much to learn, especially marketing.) If I had been “successful”, I would have written more conservatively, not nearly pushing myself as much as I have. My business plan doesn’t expect full time writing until I hit retirement, 15-20 years from now, hopefully with a backlist that’s sufficiently large, diverse, and strong enough to span the decades. Or I may wind up too left field for such a conservative genre and be no better off, with my best novels being fantastic but never popular. If I didn’t dare, the work wouldn’t be worth it to me.

    Strangely, after years of going nowhere on the Nook, I earned enough from them to turn last year into a profit, I now have a little traction, while my traction on Amazon has slipped. A year of permafrees did some good, as I think that slow exposure to me over time sells me better than big pushes, but January just died. Even so, I think that I can continue this upward trend, but I’m still in the pocket change league, so maybe I’m full of pretentious BS.

  18. I grew up on the farm so I know the income off the farm was not the same every year. Like writing, you had your good years and your bad years but I never remember ever doing without. I think that was in part because of their money management skills. They knew how to save and handle the years that were bad.
    They passed that on to me and my husband is the sole bread winner. I stayed at home with the kids. It wasn’t easy but we did it. We own our own home and that was in part to parents helping out. We did pay back one parent for their loan.
    The only real debt we have is the line of credit from the bank. I wish that was gone.
    I so wish that I could make enough money off my writing to pay that off but that isn’t going to happen any time soon. I started publishing after the gold rush so now I have to fight for every sale I get and I only get a few. Last year I only had two sales and that was from Smashwords, not Amazon. I have yet to make any US sales there. I think I’ve had more Kobo sales than Amazon sales. I think there was a Kobo sale last year too so that would three sales last year.
    I wish I had put out books in the gold rush as I had novels written but I was scared of the indie publishing then. I found it intimating. I was never against it but I knew the work involved and that there was a huge learning curve. In the end I’m glad I took on the learning curve for many reasons but I now know that I have to work very hard to make this work. I always admire artists who make their living from what they do. But I know they had to work their butt off to do it. That is what I have to do now as this gold rush is now over. But maybe that is a good thing as I don’t know what I would have done if I had made a lot of money and then suddenly lost it. Would I have given up? I don’t know but this way at least I know I’ve earned it if it works out and there is no guarantee that I will make much of anything at this.

  19. OMG this.

    I know a couple of ex-writers who are in exactly this situation. I don’t see them much because, well, nice folks, but I don’t want to get drawn into their world.

    We keep the business money separate from the family money–LLC now, but looking at C-corp soon. I get a mostly regular paycheck, because I move a small amount from one to the other on a monthly basis. And I have warning levels set for the business account; if it drops to X, we do this and that. If it drops to Y, we go to emergency mode. And if it drops to Z, my business has failed and I need to get a job.

    In the early days, we hit X. The income/outgo curve looked really scary when I first made the jump. But predetermined levels of “this is where we panic” are useful. “I’m not at X, so don’t panic.”

    This last few months have been kind of worrisome. Sales are down. (It’s like some big real-world drama has distracted people from my books. Weird.) But the business reserves are well above X, so I just keep swimming–er, writing.

    When the business account hits a certain high water mark, money gets shifted into the “pay off the house” fund. Yes, I could tap it for other purposes if need be, but setting it aside tells my brain it’s off-limits. I am SO looking forward to writing that check!

  20. Regarding tax deduction: many people somehow seem to think they’ll get the whole money refunded. Thus buying stuff that may be deductable but still unreasonable.
    Actually, what you spend only reduces the income on which your tax is calculated.

    Let’s say you earn 10,000 Gold with your writing and the king wants his tenth. That’d leave you with 9,000 Gold after the marshall’s visit.
    Now your writing feather breaks and you’ll have to buy a new one. You decide to invest in one of those new Grammarnazirius GTI with built in auto-correct, for 1,000 Gold.
    Your income is 9,000 now and the king still wants his tenth: 900 Gold.
    So, while your investment shrunk your income by 1,000 Gold, your tax is only 100 Gold lower.
    The feather has cost you 900 Gold then. It better be useful.

    Sorry if I sound patronizing but that’s a pet peeve of mine.

  21. 2014 was the year I made some decent money on Hatchling (sequel delayed due to lots, oh lots of things)–bought a new freezer, a lawn mower, and paid off the pickup. Money well spent.

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