finances

Am I kidding? “Writer’s finances” and “zen” in the same sentence?

For most writers I know, talking about the financials of how we make a living is completely antithetical to feeling calm and zen-like. There’s the stress of finding paying gigs. Of selling stories. Of late checks. Of deadbeat clients.

Things are messy and complicated, and far too close to the edge of total ruin than most of us would like to admit.

Maybe you’ve already seen this Salon article about writers who are sponsored by their well-off partners. If not, give it a read. It’s thoughtful – and thought-provoking.

I’m not pointing you there to start a bitchfest about how we can’t all have rich partners or parents to support our writing habits (although in my case having a second income has made my transition to freelancing loads easier than it would have been otherwise). Rather, I think the author, Ann Bauer, has a good point.

Writers don’t talk often enough about the money side of our art.

We get jealous of the 6-figure incomes of freelancers who now make most of their salary selling informational products. We assume Nebula and Hugo winners must be living the high life of leisurely writing days broken only by trips to the bank to deposit royalty checks. We think if only we can break into the Huffington Post we’ll be rich (they don’t pay, people!).

But here’s the thing.

I LOVE talking about money.

I’m that person in our relationship who likes to budget down to the cent and figure out income and expense. I run numbers constantly. I really like sitting down with my husband to talk about our budget. I read blogs about interest rates. I was ecstatic when our bank (BECU) came out with a new money management tool that ran automatic reports! And had color-coded budgets!

My husband used to think I obsessed about our finances in order to stress myself out, but it’s really not that. I do it because it’s a comfort to know exactly what’s going on.

Today I’m sharing my obsession with my writing business finances with you, in the hopes that it’ll help someone else who’s just getting started see how I do things. I’m constantly tinkering, so if you have any advice to share, please please please leave it in the comments!

C’mon, writers! Let’s talk about money!

Part 1: Setting Up Your Finances

I’m not going to lie – it’s a feast or famine out there. I’ve had horrible lean stretches that would have had me on the street if I didn’t have the luxury of a husband with a (mostly) steady paycheck, or a squirreled-away savings account for the low times.

But even though that feast or famine cycle is never going to change, I’ve tried to set myself up to weather it as best as I can.

1. Budget, budget, budget

If you’re going to live on a variable income, you absolutely need to know your budget. I’m not talking about using an envelope system or anything like that – though you certainly can if you want to. I’m talking about being honest about where you’re spending your money every month.

Because I track our spending, I know exactly which payments we can stop, luxuries we can scrimp on, and items we can sell off (*ahembikes*) if we need extra help on the rent this month.

Part of budgeting is figuring out where you can cut back to take the stress off. It’s knowing what you have to pay, and what you’re paying out of preference. It’s knowing that eating beans and rice instead of going out a few nights a week means $400 less a month that you have to drum up in client work.

2. Pay yourself a set salary

The best thing I ever did for my finances was to set up a business checking account. I deposit every writing-related check into that account, I transfer 35% of the amount into a separate savings account for taxes, and then I pay myself a set salary on the 1st and 15th every month.

This does two things:

First, it lets you budget your personal life, knowing that you’ll be receiving a set paycheck twice a month. Especially once you’ve built up a buffer, setting up your finances this way smooths out your income. Now, even though your client may be late on their check, you’re not late on your rent.

Second, it puts any surplus out of reach. If you had a great month, let your business treat yourself to a nice dinner or buy you a bonus bottle of Deschutes anniversary ale – after all, you’re your own boss, and you should treat yourself when you’ve done a good job. But don’t be tempted to spend that extra cash, because when next month is slim pickings you’ll have nothing to draw on for your salary.

My business account is as sacred as a company credit card. Would you buy groceries or go to a movie on your company’s dime? No way in hell. Set up an automatic transfer for your salary, then treat your business account like it’s your boss’s money. Because it is.

3. Build up recurring work

The best peace of mind you can have is a recurring base of income. Whether that’s a job waiting tables, a steady blogging client or two, or regular income from published books, this is crucial to smoothing out the feast or famine cycle.

Right now I have a pretty standard base I can rely on every month, thanks to several clients who give me regular work. Without them, each month would be a nail-biter of a blank slate. With them, I know at least I’ve got groceries covered if everything else is crickets.

What I’m working on at this point is building up a regular passive income, as well. I get regular beer money from my bike crafting ebook, and I plan to publish several novels this year that I can hopefully start to build on. I have no illusions that I’ll make it rich yet, but each drop of water helps, right?

Part 2: Getting Clients To Pay You

Cool. You’ve got things figured out on your end, right? Now how do you get clients to pay?

That can be tough. As I write this, I’ve invoiced more for January than I have for each of the last 6 months – but I still can’t pay my own salary for February 1st because 90% of those invoices are still outstanding. Ideally, I’d have a buffer built up so that it wouldn’t matter, but I just don’t at this point. (No judging, right?)

So how do you get your hard-earned money?

None of the invoices I mentioned above are overdue – just some clients take a while to get the paychecks cut. Weeks and weeks and weeks. All you can do is sit and wait.

But once they become overdue? The instant I see in Freshbooks that they’re past the 30-day terms (which is written on my invoice, as well as in my contract), I email my contact to gently remind them that I haven’t seen the cash.

I recently heard someone say he puts clause in his contract that the copyright doesn’t transfer to the client until he gets paid in full. I haven’t tried this yet, but it’s totally brilliant, and I’ll definitely be adding that in for the future.

Getting paid:

1. If they’re regular clients, and you regularly get paid…

Just ask what happened this time.

Most of my client contacts aren’t in charge of payroll, so making sure I get paid is pretty far down on their list of priorities. They probably forwarded my invoice on and accounts payable missed it. Or they forgot to forward it on, because they were too excited about the new blog post series I turned in.

Whatever the reason, once I’ve brought it to their attention that I haven’t been paid yet, they’re generally a) mortified, and b) quick to take care of it.

If you’re having issues with a regular but otherwise awesome client, ask your contact for the accounts payable person. That way you can contact them directly about payment holdups, and keep your relationship with your primary contact free from money troubles.

2. If they’re new clients…

Assume the best and shoot them a followup email. Ideally with new clients I try to get a deposit up front, but unless they seem like total skeezeballs during our initial interactions, I generally assume my clients are good-yet-absentminded people. I’ve yet to be proven wrong. (Knock on wood.)

As a general rule, you should get half up front with new clients. If they balk at that, you should probably balk at putting in an entire project’s worth of work for free. They don’t trust you? Don’t trust them.

3. If you’re having problems with payment every time…

Get out of that relationship!

Please don’t work for people who don’t have their financial shit together. If they seem sketchy and are holding up paying you, fire them and find another client. If you have to hunt down your payment every single time, drop ’em like a rattlesnake before you get bit in the ass.

I used to have a friend who waited tables at a restaurant, and would literally run to the bank each payday to deposit the check, because if he was one of the last on the payroll to do so, his paycheck would most likely bounce. Isn’t that insane?

You can guarantee that if this restaurant didn’t have enough cash on hand to make payroll – EVER – they didn’t have other basic shit together.

Don’t work for people like that.

Whew. That was way longer than I thought it would be. If you’re still reading, I’d love to hear from you. How do you deal with the financial uncertainty of making a living as a writer?