Author Business & Publishing, Writing & Publishing Articles

Getting in the Money Mindset: A Basic Financial Plan for New Authors

Getting in the Money Mindset

Back when I first discussed my goal of full-time authorship (and again when I reflected on my first full year as a published author), a few readers expressed interest in learning more about my plan to become a full-time author. In short, I’ve had to realize that, if I want writing to be my job, I have to think of it like a business. This mindset shift marked a huge evolution in my writing life, and I’ve done my best to outline my thinking process in the article that follows.

First, I want to make a few disclaimers:

1. I am not an accountant or financial adviser. All advice given should be taken (preferably to a professional) with a grain of salt.

2. This post is meant for authors who want to make a full-time career in independent publishing.

3. This post is written in first-person, because it is based on my own experiences and rough financial plan at this early stage in my career.

4. My situation will not be the same as yours. Therefore, my plan will not work perfectly for you, and I cannot create a custom plan for you. However, the over-arching principles should be applicable to all. To that end …

5. This post is meant to be an outline of a basic financial plan. It will not cover taxes, financial tools/software, budgeting, or how to sell books.

6. Again, I’m not an expert. Advice, resources, and other tips are welcome and appreciated!

All good? Good.

A Simple, Small, Shoulda-Had-It-Months-Ago Epiphany

If you listen to any of the major independent publishing podcasts, the authors and creative entrepreneurs featured will give you the same basic advice: know your goal. Mine is to make a full-time living from my writing.

While I’ve had this goal for years now, I’m embarrassed to say it took me a long time to realize exactly what this meant for me and Boxthorn Press (my business). I’d always looked at the big picture – one day, my book royalties will be enough to live on. That’s great, but it’s not a magical switch that will flip.

What I finally realized was that my ultimate goal of full-time authorship depended on one thing: making money. (Duh, right?) Now, I want to clarify that I’m not a greedy cash-grabber. I love writing, and I have told stories since childhood, regardless of financial gain. That being said, I want to continue to write for the rest of my life – and I’d have a heck of a lot more time to write if it were my only job. So, that’s what I’m going to make happen!

Breaking Down the Steps to Profitability

The Ultimate Goal: Book royalties must cover operating expenses (what it costs to publish, business activities, and requisite state/federal taxes), plus produce a profit (excess money to create my salary and pay personal expenses).

Step One: Invest Personal Funds
Currently, I’m covering all publishing expenses with personal funds from my day job. By keeping track of these expenses, I know how deep Boxthorn Press is in the negative. (Fun fact: on average, a small business owner in any industry can expect to spend about five years in this phase.)

Step Two: Royalties Cover Operating Expenses and Taxes
Eventually, royalties from my published books will begin to cover the cost of producing and marketing new books. At this point, all funds are re-invested in the business (in place of my personal funds). This means that the business has NOT broken even (because the excess funds have not recouped my initial investment) and it is NOT profitable (because there are no excess funds beyond expenses and debt).

Step Three: Break Even
In this stage, my total book royalties (for the length of my career) will equal my total personal investment. From this point on, the business will be profitable.

Step Four: Profitability
The royalties from book sales will exceed the operating expenses and requisite state/federal taxes, and create a true profit. Once this profit can cover my personal expenses (rent, groceries, insurance, etc.), I can make writing my sole source of income.

Defining and Calculating Profitability

How long am I willing to wait to go full-time?
Because my husband will be in graduate school for the next several years, I’m taking a VERY long-term approach to full-time authorship. As the main breadwinner, I must have a steady income to support us. Therefore, my goal is to go full-time after he finishes school. Estimation: 2025 (8 years)

What is a full-time income?
To determine this number, I must take into account living expenses (which will depend on where and how we live), my husband’s potential income, and our savings (and desired future savings). Since we plan to settle in the Midwest, my husband will be a university professor, and we should have a healthy nest egg saved, my starting salary could be low. Estimation: $20,000 (after taxes)

What are my annual operating expenses and taxes?
Expenses will vary based on regular business activities and how many books I publish. Likewise, the amount of taxes I owe will vary based on how much actual profit my business makes. Estimation: $4,000 per year

How will my profits grow each year?
A tough number to estimate. The more products I have to sell, the more potential sales I can make. As my number of books and investment in marketing increase, so will my profits. Estimation: see chart below

How do I determine when I can go full time?
At the simplest level, here’s the equation: Royalties – Expenses = Desired Salary

That’s easy to calculate for one year. However, it gets a bit messier when I take into account the years of personal investment and negative profits. Note: this chart does not include taxes, for purposes of simplicity.

Annual Expenses: the real or estimated cost of publishing and marketing books
Annual Royalties: the real or estimated royalties received from my published books
Annual Profit: excess funds (royalties minus expenses) per year
Running Gross Profit Margin (GPM): total profits for the lifetime of the business

2018: Annual profit hits zero (step two above)
2020: Gross profit margin turns positive (step three above)
2025: Annual profit exceeds $20,000 (salary goal met!)

How to Meet My Financial Goals

Short-term: Hit monthly royalty goals
Because I’m a visual person, I like to break down my larger royalty goals by both time and assets (e.g. books). For example, this year I want to make $2,000 in royalties. By time, that’s $167 per month. By assets, that’s 80 ebooks (priced at $2.99, sold at Amazon’s 70% royalty rate). I do this for all products, price points, and royalty rates.

Long-term: Follow the chart
This was the biggest “Eureka!” moment for me. If I keep my expenses at/under $4,000 a year and meet/exceed my annual profit goals (and no personal tragedies strike), I WILL make enough money to be a full-time author by 2025.

Forever: Save for the unexpected
In any aspect of life, there will be things outside of my control. Maybe Amazon will change its royalty rates. Maybe a marketing promotion will lose tons of money. Maybe I’ll get hit with crippling medical bills. That’s why I’ve allowed myself a long timeline, over-estimated expenses, and plan to build up a healthy nest egg before making the leap. I suggest you do the same.

How to Speed Up the Process

Mathematically speaking, the only ways to reach my goal faster are to A) spend less than my estimated annual expenses or B) make more than my estimated annual profit.

There are about a million tactics that could help. For example, I could higher a cheaper cover designer, play with book pricing, invest in proven marketing services, or create an additional source of income (e.g. courses or editing services). As stated in the disclaimer, this subject is outside the scope of this post.


The road to full-time authorship is long and difficult and different for every writer. However, the basic, over-arching plan applies to all of us.

Figure out the salary you need to live comfortably – this is your goal. Then, weigh your annual expenses vs. your annual profit until you’ve recouped any personal investment. Continue until the annual profit (after taxes) meets your desired salary. Do everything in your power to meet these numbers. Repeat every year, for as long as it takes.

Then once you’ve become a full-time author? Well, I’ll let you know when I get there …

For more information on the business and financial aspects of authorship, I recommend Business for Authors by Joanna Penn. To learn more about taxes and other legal concerns, check out The Self Publisher’s Legal Handbook by Helen Sedwick.