Financial Boot Camp


Vision 7


Financial Boot Camp


S.L. Viehl

Copyright © 2002, S.L. Viehl, All Rights Reserved

Pursuing a professional career as a writer is a lot like being a contestant on  “Survivor” -- you have to constantly prove your talent in an unfriendly environment surrounded by hostile competitors.  Producing quality work in the face of repeated rejection from ever-narrowing markets is enough stress for anyone; once you finally start getting paid for all your hard labor, why worry about finances?   

Imagine walking into work one day and saying to your boss, “I quit.”  You can’t do that unless you can survive on your writing income.   

Managing your finances as a professional anything is part of life, but pro writing requires an additional amount of initiative and self-discipline.  Once you’ve joined the ranks, you’ve got to undergo some basic financial training.  Think of learning to handle your writing income like going through boot camp -- it won’t be easy or pleasant at first, but once you know the drills, it becomes almost automatic.      

Fall In and Listen Up!   

First, you must decide if you can afford to join the ranks. 

In order to make a living as a professional writer, your income must exceed your annual cost of living by at least ten percent.  Your cost of living is what you spend to have food, clothing, shelter, transportation, pay taxes, insurance, and anything else to support yourself and/or your dependents for one calendar year.  Your income is the money you earn from writing during the same period of time (if you have no other income outside of your own earnings, this is a nonnegotiable figure.)  Basically, what that mean is: if your cost of living equals $45,000.00 a year, you must make at least $49,500.00 from your writing income for that same year.  Before you quit your day job, make sure you have your figures straight. 

How do you calculate your income as a writer?  The only way you can calculate guaranteed income is by obtaining contracts from reputable publishers for advances and royalties, and calculating your payment schedule under contract.  If it is not in writing, it is not guaranteed income, and you can’t have a viable financial plan based on “I hope I sell something this year.”      

However, if you have consistently sold your work over a period of time, and have regular annual income from it, you may be able to estimate your writing income by averaging -- i.e. add up your income for the last five years and divide by five, and the total will be your average annual income.  When you do this, just remember this is an estimate, not guaranteed income.  It’s a little like gambling on yourself, and you should always have a back-up income resource in the event you have a bad year as a writer. 

Drop and Give Me Twenty! 

Once you’ve established annual income as a professional writer, you move up in the ranks to join the self-employed.  This means you become your own boss.  If you’ve never been self-employed before, you’ll be taking on some new responsibilities, like paying your own income taxes, maintaining complete records of your expenses, and possibly handling the hiring of employees -- like a research assistant or secretary.   

Here in the United States, taxes are like push-ups, and the IRS is your drill instructor.  Be prepared to hit the dirt and endure a little pain.  

Income from self-employment is subject to two levels of taxation: 15.3% self-employment tax, and federal income tax.  Self-employment tax consists of 2.9% Medicare tax and 12.4% Social Security tax.  Social Security tax is applied only on the first $80,400.00 of income in 2001.  Medicare tax is calculated on all self-employment income.  (This does not include individual state tax, and does not address your personal exemptions, deductions, etc.  Also, these percentages are subject to change according to revisions of the tax laws.)   

Federal income tax is based on the amount of your income minus your tax deductions, and can be obtained from the Internal Revenue Service through various forms (including your annual tax income form) or by visiting their web site at:  

As a self-employed writer, your income is not subject to withholding tax -- publishers don’t deduct your tax from your advance and royalty checks.  Neither does your agent, if you obtain one.  You yourself will be responsible for paying estimated taxes on your income on a quarterly basis, and if you don’t, you will be subject to any underpayment penalty from the IRS.  Tax payment forms can be obtained in a variety of places, including your local community library or government center. 

One reminder: all of the specific tax information contained in this article addresses only United States tax law.  Residents or persons working outside the U.S. should research tax information specific and applicable to your respective country. 

Run That Obstacle Course!  

Now that we’ve gotten the unpleasant part of taxes out of the way, let’s talk about deductions.  If taxes are pushups, then deductions are weekend liberty -- but only if you earn them. 

Like withholding tax, no one is going to take care of your deductions for you.  You must maintain complete and detailed records on your expenses.  I recommend keeping a ledger or spreadsheet to track your writing-related expenses by week -- it not only keeps you organized, but you’ll have a better idea of what additional taxes you may be facing prior to April 15th, and can plan accordingly.   

One terrific organizational method I’ve seen is making a binder of twelve ledger sheets, labeled by month, with large open envelopes stapled to the back of each sheet.  When you get a receipt, you put it in the envelope for that particular month and make an entry on the ledger.     

The real obstacle in claiming deductions is figuring exactly what you can or cannot deduct.  Basically, any expense directly related to or incurred by your writing career is usually tax-deductible.  This can be materials like printer paper and toner cartridges, but it can also be books you buy to research a genre, or annual membership dues to organizations like SFWA or RWA.  Other areas for finding tax deductions include continuing education, promotional expenses, supplies, auto travel, travel out of town, telephone costs, equipment purchases, online fees, up to 60% of your health insurance cost, etc.  However, certain expenses, like home office expense, are subject to special record keeping requirements and/or limitations of deductibility, and should be properly researched through the IRS or discussed with your tax preparation professional or accounting consultant.   

There are literally thousands of tax deduction resources on the Internet, but one of the best sites I’ve found is Kathleen McFadden’s Writer’s Tax Toolkit, at  Kathleen provides solid information and resource links on tax breaks for professional writers, and her main page is worth checking out for the research and other non-financial links as well. 

Squad Ten-Hut! 

Quality health care and affordable health insurance is another concern for the self-employed writer -- once you quit the day job, you may be looking at obtaining and paying for your own plan.  Group insurance is always the most cost-effective option when purchasing a plan, but I recommend every new pro invest some time and shop around to find the most competitive rates. 

One site I found that provided individual and small business group health insurance information on all fifty states is the Artist’s Health Insurance Resource Center, at   Also, check with the writing organizations you join, and see if they have group insurance rates available to the members.  Some groups, like the National Writer’s Union ( offer terrific benefit packages; however, their annual membership fees from $110.00 to $270.00.  Before you join any group in order to obtain health insurance, add in those membership fees and make sure it’s cost effective for you. 

Fall Out! 

Now that you have the training to do some serious financial planning, one last bit of advice: don’t put it off.  It is the easiest thing in the world to procrastinate about money matters, especially when you’ve got to worry about meeting deadlines and promoting your work.  But handling your income responsibly is an important part of your job, and it often has the greatest impact on the quality of your work and your life.    

Set aside a fixed time each week to work on your finances.  Make it a time when things are quiet and you can do your bookkeeping and keep your financial records up to date without distraction.  Incorporate managing your finances as part of your weekly routine, and in time it will seem just as natural as formatting a manuscript or changing a printer cartridge.   

If you’re still not convinced, think of it this way -- the money you save through financial planning can be reinvested in you as a writer.  If you save twenty dollars a month by saving on taxes or health insurance, in a year you’ll have enough money to buy a better computer, or go on a research trip, or attend a conference out of state (expenses which are all tax-deductible, too, btw.)   

As you continue in your professional career, you’ll face plenty of new challenges.  By managing your writing income responsibly, you’ll give yourself the security of knowing exactly where you stand, and the ability to make better decisions when it comes time to consider new offers and negotiate viable contracts.   

Best of all, you may never have to look at yourself in the mirror and say, “I quit.” 

Copyright 2002 by S.L. Viehl  

S.L. Viehl is the author of Roc's StarDoc series and writes for Onyx as Gena Hale.