Money, money, money: a primer on book deal finances and what to expect from them

Some realistic and depressing (or, more charitably, "practical") things for authors to remember.

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Now onto what you clicked “open” for: a post about writing books and making money.

The Two Essential Skill Sets of the Non-Broke Commercial Author

To survive financially while writing books, non-broke authors do two key things:

ONE: They care deeply about craft, understand the importance of knowing and empathizing with their audience, and commit themselves to the hard work of editorial development. Good books for large, discrete audiences tend to make more money than unfocused, unspecial, undermarketed ones.

That’s what every other issue of this newsletter is about: doing your books good so people will buy them.

TWO: They become specialists in—or seek specialist help with—two key financial skillsets: living on a gambler’s income and managing freelance taxes. Ideally, they do this before they even have a book deal, but it’s never too late. These skillsets are my topic today.

Before I explain how to become a specialist in these matters, let’s rewind a bit. To understand why these skillsets are important, you need to know some basics about financial reality in publishing.

Almost zero authors are able to survive on book income alone.

A while back, the Guardian reported that 54% of traditionally published authors made less than $1000 annually. Granted, these were self-reported statistics from an opt-in Digital Book World survey. It had 9000 participants, though, so the number was startling.

I wish the people doing this survey had accounted for when these authors were published and by whom. Less than $1000/annually was (and is) extremely low for those within the first 3-4 years of signing a contract with any commercial publisher. The big 5 and their competitors offer advances everywhere from the low five figures to eight figures plus, depending on the genre and the author’s platform. Four figures is more common in the realm of academic, literary shoestring, regional, and/or activist publishing.

On the other hand, “less than $1000 annually” is completely believable for commercial authors further than 1 year out from their last advance payment, provided they’re not under contract to write something new. Few commercial books earn out their advances by much if anything at all.

Remember: book contracts are temporary gig work. For the most part, they’re a “nice to have” thing that might bring you decent money for anywhere from a few months to a few years. That’s it, unless you’re lottery-level lucky.

It’s not a good idea to plan on being the exception to this, aka the person who makes life-sustaining royalties on a single book forever. Probability-wise, this is about the same as banking your life on day 2 of mid-morning MarvaTots that your toddler will one day win all-around gold at the Olympics. She might be the next Simone Biles! She will probably not be the next Simone Biles.

The above is true even for “successful” authors.

The vast, vast majority of well-known authors you read and love do not survive on their book income alone. Yes, even that one. And that one. Oh, wait, you were thinking of JK Rowling and Nicholas Sparks? OK, they could survive on book income alone, even though they don’t. But you might be surprised who can’t.

Maybe “can’t” is too strong a word. I suppose many commercial authors could choose to live on their book monies alone if they chose to live in a rural area with no dependents, no health expenses, no debt, and no desire to travel. Most of us want a little more out of life than the Unabomber does, though.

Right now you might be thinking, that Anna is so full of shit. No doubt you’ve heard about authors getting advances in the six figures plus—even THOSE people can’t live on their money? Come on.

Yes, even those people. Remember: advances are not paid out as lump sums. Depending on the amount and the publisher, they are paid in 2-5 installments. There’s definitely one on signing of the contract and one on delivery and acceptance of the manuscript. (“Acceptance” means post-editing, post-legal read, and often post-copyedits. It generally occurs a few months after delivery, which itself occurs one year or so after contract signing.)

Further payments might include one publication of the hardcover; one twelve months after that, on paperback publication; and one 6-12 months after that, if you’ve signed a 5-installment deal.

Now let’s do the math.

This is why my strangle hands come out when I see online rage about some innocuous debut author getting A MILLION DOLLARS, like the publisher showed up at their house one day with balloons and a novelty check. Or why I full-body cringe when I see authors beating themselves up for “losing a third of a million dollars” through financial naivete, as though they had once had all of that money in their wallet, but then they blew it all on a single $333,333.33 speedboat.

Financial management is hard when you’re an author. And if you find yourself struggling with it now or down the line, please do not think anyone with an iota of industry knowledge is going to judge you like people judge MC Hammer for going bankrupt. It is not the same. Nowhere close.

Here’s what makes financial management as an author so hard: the installments plus the unpredictability. Let’s say you’re among the very, very, VERY lucky few authors able to secure a $250,000 advance on a debut book. If you’re a novelist, you’ll have already written the entire book on spec. If you’re a nonfiction writer, you will have completed at minimum a spec proposal of some kind. In neither circumstance will you or your agent have anything more than a vague idea of the money you’ll get until someone’s actually made an offer. Try integrating that level of uncertainty into a 5-year financial plan.

Once you do get that sweet $250k book deal—which, again, is a number faaaaaaaar higher than most commercial authors get from big 5 types—it will most likely be paid out in 4 installments of $62500 gross, each of which arrives 12-18 months after the previous. Literary agents will receive these payments from publishers, take their 15% commission, and pay their authors a net share of $55250. However, the author is in almost all circumstances liable for taxes on the gross, the $62500.

By the way: since we’re talking freelance/1099 income, authors are also responsible for paying all their taxes themselves. And paying for their health care. And oh yeah, when this $250k advance payout is done, there’s zero guarantee of any further book income at all, ever. If they’re able to get contracts for more books down the line, most authors never make as much again as they make for the first. (Many authors do! Most don’t.)

Altogether, what this means is that an author making $250k for a debut is in fact netting somewhere in the $30s or $40s annually for 4 years. And, I mean, that is not nothing. Millions of Americans live on less.

Still, though, it’s well below median household income. To net as much as, say, a 25-year-old junior associate at a medium-sized urban law firm for the next 4-5 years and 4-5 years alone, an author would have to get an advance closer to $1 million.

This is why most of the writers you know and love need to have multiple income streams.

Many of them, for instance, are career freelancers. They treat book deals like the long, chewy, reasonably well-paid freelance assignments they are while continuing the hustle on smaller paid gigs elsewhere.

Many also teach. They’re writing adjuncts in colleges, tutors, or seminar teachers for companies like Catapult. Depending on the course, an author might or might not need an MFA to teach it; a commercial book deal is often enough.

Others are single-person media empires. They don’t just write books: they host podcasts; produce YouTube series; put together online classes and seminars for fans; run Patreons; sell merch; give keynote speeches; and send out paid newsletters (how brilliant!).

Lots of them also just have straight-up unrelated day jobs. Or high-salary spouses. Or a trust fund.

It’s all very chaotic. It’s also not fair. I wish I had the power to fix capitalism and institute a universal basic income. Alas, however, I do not. As a literary agent, I can only tell you what you’re going to need to know to live like this, if you actually want to do that and get the opportunity some day. (You might not want to do it at all if you need predictability and routine in your life!! Don’t say I didn’t warn you!)

Are you beginning to see why authors need those two specialist skillsets I was talking about above?

Managing freelance taxes

If you’re a commercial author with a book deal, you need an accountant. Period. However many hundreds they cost, they will save you thousands—thousands—in tax bills through some combination of smart incorporating and/or deductions. YOU NEED TO HIRE AN ACCOUNTANT. Unless you yourself happen to be a CPA, or your partner does or something.

I’m not going to give you tax advice here. Even if I did, you would frankly be insane to listen. I’m a literary agent!!

That said, because I am a literary agent who co-owns her own agency, I am in the same boat as a lot you with income: unpredictable amounts, zero tax withholding. So I can tell you that in my household, carefully itemized deductions make an absolutely gobsmacking difference in our annual tax bill—especially this year, when I dramatically expanded my home office.

If you don’t believe me, take a look at this primer on taxes for creatives. It was written by Katherine Pomerantz, someone who actually IS an accountant. Read it and then find someone like her to help you navigate the current system.

Two accountants in the DC area I have used and love are Abe Friedman at Neuman Pollak Associates and the whole team at Caldwell CPAs. Not sponcon! Just my people.

Living off a gambler’s income

This is the second tricky thing about author finances. It’s also the stickier one, because it’s likely going to touch on some deep-seated shame, identity, class, perfectionist, and/or family of origin stuff for you. WHOMST AMONG US.

A dear friend who is an author once explained her financial experience to me with a brilliant metaphor. She said something like this: for her, getting a big book deal was like starving for decades before being abruptly ushered into a mouthwatering all-you-can-eat buffet. Inside, mounds of perfect food were laid out for her sole consumption, alongside a clean plate and silverware.

The food was abundant and delicious, although not unlimited. And oh yeah: the person who brought her there had whispered on the way in that this was actually going to be all she ate for the next YEAR, her total food supply. It was therefore best that she eat a modest lunch before packing up and saving a year’s worth of leftovers. Yes, but: the Tupperware containers and freezer were nowhere obvious. Someone had buried them unhelpfully out of sight, in the back. And to repeat: she was starving.

I feel this. I feel it so hard from my perspective atop the MOUNTAIN of expensive impulse purchases I have made to self-soothe in the past year. If you’ve waited your whole life for a moment to indulge, to relax, to provide, it can be SO hard not to spend most of a big paycheck in just a few weeks.

Not to mention the logistical hurdles on top of the psychological. Do you even know how to budget money that comes in large amounts just once or twice a year vs. the predictable micro-increments of a weekly paycheck? Do you know how to plan a life around income that is close to impossible to predict ahead of time and only “fixed” for a few slightly more predictable years once contract(s) are in place? Do you have a plan in place for how you’ll live if contract payments get pushed: you need longer to finish the manuscript, perhaps, or your publisher bumps your pub date till slightly later in the season?

None of this is impossible to do, even if you’re not sitting on a nest egg or trust fund. It’s just rull hard. It’s rull hard unless you’re that guy from “The Gambler” by Kenny Rogers, i.e. an itinerant who needs only think about when to fold ‘em and get back into the low-cost train bound for nowhere. And most of you do not seem to be this person.

I would also outsource these skills if you can. Google “money coach for creatives.” I’ve never worked with one myself, but I imagine that someone good—GOOD; check references, please, oh God—would be incredibly helpful in assisting you with the logistics of budgeting. I also guarantee you that no matter how embarrassing your money situation is, someone like that has seen way, way, way worse. Way worse. So don’t be embarrassed.

If you can’t afford to hire out, here are a couple of basics that might be good to know about:

• Separate bank accounts for different budget categories. If you’re an author, having just one account called “savings” and one called “checking” is probably not wise. You should have at least one for fixed expenses and one for variable, as well as ideally a whole other one for your quarterly tax payments.

  Put up a big old fence between money you already know needs to go to other people (utilities, next few months’ rent/mortgage) and money you’re sure will need to go to others in the long term, you’re just not sure when (medical bills, long-term rent/mortgage). Put an absolute WALL between those two and the one you draw out of for, I don’t know, late-night impulse geode shopping on Etsy.

  This is definitely a “do as I say, not as I do,” lol, at least in my personal life. We are beyond scrupulous at Neon: two book keepers, an accountant, separate accounts for author money and business money. At home? Let’s just say the late-night geode shopping expenditure has been a wee bit egregious this year.

• “The Envelope System” or a Goodbudget budgeting technique. These are the two techniques experts recommend most often for people with highly variable income and little desire to spend lots of time in front of a spreadsheet. The idea is that every time a payment goes in, you immediately allocate portions of it into literal cash envelopes (if you struggle with object permanence) or corrals inside the Goodbudget app (if you’re antsy with the idea of all your money being in cash envelopes in your home). You can learn more about both of them here.

• Zero-budget technique. If you actually like spreadsheets and thinking about your finances, this is an even better budgeting technique for you. You can read about it at the same link as above. The idea is basically Envelope/Goodbudget—you allocate different spend limits to different pockets of your life—PLUS a rigorous line-item evaluation of everything you spend and whether it’s a good use of your money.

• Business for Bohemians. I love and have recommended this book so many times. As an author and/or freelancer, you’re a small business CEO now. Act like it!

Here’s hoping we see each other in the Scrooge McDuck dubloon pool in the next couple of years. I’m looking forward to sustaining serious spinal trauma trying to dive into that shit with you.