Author career · Feature · publishing

Guest Post: Personal Finance for Authors by Swati Teerdhala

Hello Writer’s Block Party readers! Today we’re delighted to have Swati Teerdhala, author of THE TIGER AT MIDNIGHT and THE ARCHER AT DAWN, and a longtime friend of the WBP team, talk about personal finance for authors! Thanks for joining us Swati!

I had been planning on writing this for awhile as personal finance has always been a passion of mine. But now, with a global crisis on all of our doorsteps, the idea of personal finance is more important than ever––especially for writers.

As creatives, it’s easy to focus on only your art. But at the end of the day, your writing career is your business and you are the CEO of that business. Same thing with your money! 

Here are some key things to consider and take stock of during these times:

1. Make sure you have an emergency fund

I like to think about saving by using this simple formula: 20/30/50. 

50% of your income should account for your essentials: rent, utilities, groceries. Things you couldn’t live without. 30% is allocated to living your life: books, movies, gifts, eating out. And 20% should ideally be socked away for a rainy day. 

As writers and potentially self-employed individuals, it’s even more important to have an emergency fund that can allow you to live your life for 3-6 months. The best way to calculate the number to aim for is to tally up all your average expenses in a month and multiple by 3 or 6, whichever amount of time you’re aiming for.

Supposed I spend $1,000 a month. My emergency fund for 3 months should be $3,000, for 6 months, $6,000. Your number one priority is to get that fund into place. Best way I’ve found is to do auto-transfers from your account into savings. It takes the thought out of saving, making it a no-brainer instead of something you have to constantly think or worry over.

I know this can seem daunting, but having that rainy day fund will ensure that you can write what you want, when you want it. Especially if you’re self-employed. 

2. Save for retirement

There are a lot of ways to save for retirement outside of an employer’s 401K. If you have a full time job, put money into your 401K, especially if your company does matching. That’s FREE money! If you’re a full-time writer or your job doesn’t offer a 401K, no worries. You can always open up an IRA on your own. 

In fact, go do it now. It’s super easy to do and that money will start working for you. If you’re a full-time author, you can contribute to a normal IRA and a SEP IRA which is focused on self-employed individuals. 

If that all seems like a lot, here’s all you need to focus on. Open an IRA now. Don’t stop, don’t pass GO, just do it! I personally use Fidelity, though there are a lot of options.  

3. Consider incorporating your business

This one’s a doozy! If you feel comfortable with the first two and you’re a full-time, self-employed writer, you might want to consider incorporating your business. 

It not only gives you legal safety (aka you can’t be sued for your personal net worth), but allows you to separate your income and potentially save money on taxes. I’m not an accountant though, so I would greatly advise speaking to one! It’s also important to check into your individual state’s incorporation laws. I live in New York, which has possibly some of the most archaic laws around starting a business. Sigh. But it’s a lot easier in other states, like my hometown state of Virginia.

This is definitely a level 10 sort of step and won’t apply to all writers. But I think it’s always good to know what’s available to you! Especially as you start to think of your career as you opening up shop, having these protections in place can help you down the road. 

Phew! Each one of these topics could be a whole series of blog posts themselves but I tried to summarize what I think is most important. As a reminder, I’m not a professional accountant or financial planner so everything is my opinion. Make sure to do your own research!

And if you’d love to learn more about personal finance for authors, sign up here. I’ll be putting together more content around “How to Business as an Author” and you’ll be first on the list to access it. 

Stay safe, healthy, and smart everyone!

Swati Teerdhala is the author of The Tiger at Midnight series, which has appeared on both Barnes and Noble and Book Riot’s Most Anticipated Novels lists. After graduating from the University of Virginia with a BS in finance and BA in history, she tumbled into the marketing side of the technology industry. She’s passionate about many things, including how the right ratio of curd-to-crust in a lemon tart. She currently lives in New York City.

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