Financial Indie: Financing Your Writing Career

“Financial Indie” is designed to help writers finance their careers. If you have an investment question, please post it, and I’ll try to incorporate it into a future article.

I cheered when I saw my Apple (AAPL) stock jump nine percent on April 25 after another great quarter, earning, perhaps, a better return in one night than I will from a year’s worth of effort to sell books. It made me wonder why so many writers chase book sales to earn a living when so few are successful, as the Wall Street Journal pointed out in an article about the self-publishing industry. While writing is an admirable calling, the economics of the publishing industry suggest that most writers need alternate sources of income to support themselves financially, at least at the outset of their careers.

After I started writing full time, I found no lack of information on how to write and publish books but few resources on how writers, particularly those with limited budgets, could finance their projects and supplement their income. Most articles I’ve read dealing with the financial aspect of writing focused on how to save money or publish on a tight budget. A few suggested doing freelancing and editing jobs. Those are viable ways for would-be authors to make money, but they can also be time-consuming. Every minute a writer spends working for someone else is one less minute spent on their own writing projects. There are other ways to earn extra income that take less time and offer a higher rate of return. Investing is one.

Self-publishing a book is not cheap. A writer may pay more than U.S.$1,000 to write, edit, and publish a book (excluding marketing expenses). It costs hundreds of dollars, if not more, to hire a professional editor to polish a manuscript and a designer to create a book cover. An e-book cover can cost as much as U.S.$100; a print version more than $200. The writer will need to purchase an ISBN from W.W. Bowker for each book medium and copyright it. Although Kindle Digital Publishing, Barnes & Noble, and Smashwords publish and distribute e-books for free, publishers usually charge for premium services such as expanded distribution and print-on-demand. Marketing expenses vary. If a writer is good at using social media, they may pay nothing to advertise. Some pay thousands of dollars to hire professional marketers. Those looking to hire an agent and publish through a traditional publishing house should expect to spend money on pitching their book.

What this means is that writing costs money in the short term, and until you earn a respectable income from book sales, you’ll need a way to finance your efforts. For most, it means working full time and writing when you can, but it doesn’t have to be that way. By planning ahead and investing wisely, you can build a stable income that will support your writing and help you move away from depending on a paycheck toward becoming a financially-independent writer.

I’ve been investing for a long time. It took me years to build an investment portfolio that gave me the opportunity to leave my day job. It wasn’t an easy option waiting to launch my writing career, but my patience was rewarded last year when I took the plunge and left my job to write full time. It gives me peace of mind knowing that investments such as Apple will support me until I establish myself as an indie author.

If you don’t have an investment portfolio, you should. How do you get started? Should you buy shares of Apple at more than U.S.$600 a share and hope they reach U.S.$800? No. Chasing returns is a fool’s game. I don’t recommend chasing “hot” stocks, even one as mighty as Apple. You can purchase Apple by owning shares of mutual funds and exchange-traded funds (ETF) that limit your exposure to price swings.

Start by writing a personal investment plan. Determine your financial goals and set a timeline. How much do you want to earn, and how long will it take to achieve it? Look at your budget to see how much you can set aside to build your financial portfolio. Just as you would outline a novel before you write it, you need a plan before you invest.

Figure out how much you can save each month and write it down. Setting aside a small amount in the near term can go a long way to supplementing your income in the long run. Look at your cash flows and decide what discretionary spending you can eliminate – including from your writing budget — and how much you can save. If you stop buying what you don’t need, how much money will you have to grow?

See if you can set aside about U.S.$100 per month. In future articles, we’ll use this as a base to help you build your portfolio.

Click here to read the next article in the “Financial Indie” series.

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The Penny Trick

A poem.

by M.G. Edwards

Eyes view one penny’s note,

Drawn out from magic’s coat,

Believe me all that I see,

Be not one but penny three.

Surely to me the penny pays,

Three not one makes me gaze,

Want I three not penny one,

Left I am with what I shun.

pennyanim

M.G. Edwards is a writer of books and stories in the mystery, thriller and science fiction-fantasy genres. He also writes travel adventures. He recently published a collection of short stories called Real Dreams: Thirty Years of Short Stories available as an ebook and in print on Amazon.com. His upcoming travel novel, Kilimanjaro: One Man’s Quest to Go Over the Hill, will be available in March 2012. He lives in Bangkok, Thailand with his wife Jing and son Alex. Visit his web site at www.mgedwards.com or contact him at me@mgedwards.com. Find him on Facebook or @m_g_edwards on Twitter.

© 2012 Brilliance Press. All rights reserved. No part of this work may be reproduced or transmitted without the written consent of the author.

Financial Indie: Blogging Your Net Worth

The other day I read an article in BusinessWeek Magazine about bloggers who write openly about their financial net worth.  Many are in search of wealth and want to broadcast their pursuit online.  Some seek financial security and enjoy sharing their financial insights.  Virtually all of them enjoy showing off the size of their wallets.  I surfed over to NetWorthIQ.com, a website featured in BusinessWeek that is devoted to showcasing your net worth.  It’s an interesting website.  I opened an account and added our own statistics.  BusinessWeek raves that it is a social networking site a la MySpace, but that’s much too generous.  NetWorthIQ has a long way to go to match MySpace’s networking capabilities.  For example, I couldn’t find any way to contact anyone else who registered on the site.  NetWorthIQ allows you to see user’s net worth and check out their external blog and/or home page if they have one, but that’s about the only personalization the site offers.

American culture is paradoxical when it comes to financial matters.  Americans don’t like to publicly discuss personal finances (e.g. divulging their salaries or annual income).  Many Americans moralize about wealth, associating the pursuit of wealth with “good” or “evil.”  Moralizing about money complicates discussions about financial matters.  Few parents sit down with children and discuss financial discipline because it’s a touchy subject akin to talking about “the birds and the bees” (sex).  Either the parents guard their own financial status closely, or they don’t know enough about the subject to talk about it.  Instead, they assume that their children will learn fiscal responsibility through osmosis.  Many children never do and perpetuate a cycle of financial ignorance when they become adults.

Despite any misgivings about money, Americans generally try to “keep up with the Joneses,” the Jones family being a theoretical peer you find yourself constantly comparing you to in terms of material consumption.  If Mr. or Ms. Jones buys a new BMW, then you must buy a Mercedes to keep up with him or her.  The open scene of the movie “Fun with Dick and Jane” captures this concept so well.  Dick’s neighbor shows off his voice-activated Mercedes to Dick (Jim Carrey), and Dick responds by ordering his older BMW parked in his driveway to “sit” and “play dead.”  The parked car obeys his commands.  Americans typically display wealth through big-ticket items purchased at the level they can afford–a nice home, car, boat, a big-screen TV, or luxury goods, even a $5.00 cup of Starbucks coffee.  A smaller cabal of Americans prefers to build wealth quietly and live modestly, saving and investing whenever possible.  Some of us view material consumption as a liability; that is, if you buy something that costs money to maintain, it’s a liability and should be avoided.  We prefer to limit consumption and build assets, avoiding consumption that drains our wallets.  We need to purchase necessities that may cost money, such as a home, but we prefer to minimize these liabilities.

NetWorthIQ is valuable in that it allows you to benchmark your investment portfolios against others’ portfolios.  “Benchmark” is a newfangled word that means you compare your investment portfolio to Mr. or Ms. Jones’ portfolios to build investing insight.  The site has a great feature that allows you to compare your investing habits with others across many demographics, including geography, age, income level, and occupation.  I find this information helpful in deciding which investment strategies to pursue.  For example, according to NetWorthIQ users, higher net worth individuals typically own more liquid investments than retirement funds, and they invest more money in stocks than in bonds.  Most also own real estate and “other” assets.  Certainly, these types of comparisons can lead to a tendency to show off or an excessive desire to earn money.  Nevertheless, when used correctly, they can help you build your net worth and gain positive insights into managing personal wealth.

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