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Home » Budget; Finances; income

Budget; Finances; income

Two Basic Tips on Budgeting with an Irregular Income

By Tamela Hancock Murrayon January 9, 2014
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Senior man checking home finances

One challenge of writing books for a living is the fact that unlike many other jobs, you don’t usually see a cycle of paychecks appearing at regular intervals with predictable amounts. Instead, you may see a whoosh of money, followed by smaller amounts every few months triggered by actions on your part, such as turning in manuscripts and proposals. Only well-established authors will have this income augmented by royalty checks, and even then, those checks feel infrequent (to the author) and are unpredictable in amount.

This isn’t much of a worry if you’re not using writing income to pay bills, which do arrive on time every time, with startling regularity. But if you’re hoping to pay bills with this income, here are two basic management tips:

1.) Realize that your advance is a payment against future earnings. It is not a signing bonus. Once you accept the advance, your book must earn that advance back before you see any royalties. So while your advance may seem like a windfall, it is not. I recommend dividing the advance payment by the number of months you will need to fulfill your contract and using that figure as a guideline to your true budget. For an example using easy math, if you will take two years to fulfill a book contract and your advance after agent’s commission is $48,000, you have $2,000 a month income from your books. But don’t spend it all because of…

2.) …Taxes. I recommend budgeting at least 30% of your income for federal, state, and local taxes, and 40% is even better, especially if your total household income is high. Part of the reason is because you are now responsible for the employer’s portion of Social Security. It’s better to budget too much and be happily surprised at tax time than not enough and have to scrounge for funds on short notice later. But as always, please seek a personalized plan for yourself from a professional tax adviser. My point here is not to forget to hold back enough for taxes.

As for the rest, be wise and be sure to have a little fun, too!

Your turn:

What are some tips and tricks you can share for managing an irregular income?

What is the hardest aspect of living on an irregular income?

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Category: Book Business, Career, Money, TamelaTag: Book Business, Budget; Finances; income, Money

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