The Money Book gets a mention in a Policygenius Article on Freelancers

Image by Thought Catalog via Unsplash.

I was interviewed recently for a short piece up at Policygenius. The topic is money and freelancing, a topic Denise and I explored exhaustively in our book, The Money Book for Freelancers.

Check out the article here, if only to see how I can manage to work the word “freaking” into a serious personal finance piece.

The article was written by reporter Hanna Horvath, who I was delighted to discover had once been a features editor at the same newspaper I worked at in college, The Daily Orange.

Thanks, Hanna. Nice meeting you.

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Yes, You Really Do Have to Pay Estimated Taxes

For tax season, I’m running some of my older posts pertaining to our book, The Money Book for Freelancers.*

If there’s one lesson we learned as we interviewed experts for our book, it’s this: “Pay your estimated taxes.” This is the single biggest mistake freelancers make. They don’t pay their estimated taxes, and come April 15th, they’re shocked by how much money they have to come up with. No one likes paying taxes, but if you pay a little now, and a little throughout the year, you’re in better shape to deal with the final number come April.

Estimated taxes in the USA are due four times a year, in April, June, September and January. The dates may seem a little arbitrary. After all, shouldn’t quarterly taxes be paid every three months?

Short answer: No. The IRS makes the rules, so they can basically run roughshod over the Gregorian Calendar. On June 15th, you owe Uncle Sam some portion of the income you earned between April 1 and May 31. You get a two-month period at that point but get a four-month period at the end of the year. Quarter 4 estimated taxes are due January 15th, based on income earned September 1 to December 31. The official IRS websites on these matters is here and here. If you think it will help you, go ahead and mark these periods and the due dates on your calendar.

Skipping estimated taxes until the end of the year is not really an option. That only sets you up for penalties and interest. How much do you need to pay? The only person who can tell you that is your tax preparer. Chances are, when you get your annual taxes done, your tax guru printed up some vouchers for you to use come estimated-tax time. If so, then you’re golden. Dig out those vouchers and send in what’s printed on the forms. One goes to the feds, the other to the state in which you reside.

If you didn’t have your taxes done by a tax preparer back in April, then oy, oy, oy. You are making us nuts. After we went and told you in our book how important it was to have someone like that!

Some tips for finding that person.

 Our Tax Preparer Wish List 

1. Someone who, duh, knows taxes. You don’t necessarily need an accountant (although depending on your business, you may) and accountants can be more expensive. What you do need is someone who specializes in taxes, and who works with a number of self-employed clients. Be sure to ask.

2. Someone who charges a reasonable, yearly fee, depending on the complexity of your return. If you work alone, are struggling to make a profit and have a pretty manageable return, you shouldn’t be paying the same rate as someone who has 10 employees and a net profit of $250K. 

3. You absolutely, positively want someone you can contact throughout the year to ask about quarterly tax payments and retirement investments. This is key. At the end of each quarter, you should be able to send an email to your tax preparer, telling her how much money you’ve earned in that quarter, and asking her to calculate your estimated taxes. You should also ask her to send you the vouchers you’ll need to mail in your various payments. It’s her job to do this for you. If she is unwilling to do this, wants too much money to perform this task, or is too distracted with other things to get back to you, get another accountant. You deserve someone who takes your business seriously.

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Yes, I am trying to post here more often. Thank you for noticing. If you want to sign up for my newsletter and claim your free ebook, go here. Thanks — Joseph D’Agnese

Why are you tossing your receipts?

During the USA’s long slog toward April 15th, tax day, I’m running some of my older posts pertaining to our book, The Money Book for Freelancers.*

Every time I use an ATM machine, I’m amazed to see how many discarded receipts litter the ground under the machine or overflow the nearby wastepaper basket. I’m equally astonished whenever I hear customers decline a sales clerk’s offer to print out receipt. I don’t understand why anyone would toss out such useful pieces of information.

Freelancers are trained by nature—and hopefully by our book—to hang onto every receipt that passes through their hands. There’s a now-classic literary character, J. Sutter, a freelancer and former journalist, in Colson Whitehead’s novel John Henry Days, who lives for receipts. One scene in the book, if I’m not mistaken, has him chasing someone else’s fluttering receipt in an airport concourse so he can pad out his expense account.

I’m not Sutter, but I do hang on to every freaking receipt that comes my way. Back in the day, I used Quicken software to reconcile transactions from my bank with the receipts I’d collected during the week. Throughout the year, I’d keep all my tax-relevant receipts and file them away for safe-keeping after I did my taxes. These days, we use Banktivity software, but we still do roughly the same thing. Rather than save the paper receipts, we scan them daily or weekly, file the the digital scans in an Evernote folder, and toss the paper. It’s a handy system that I’m not likely to give up anytime soon.

Receipts, even those boring little ATM ones, are a snapshot of a specific moment in time. On Monday, August 21 at 13:53 o’clock you were standing at 123 Oak Street withdrawing $40 from an ATM, getting dinged $3.50 in the process. Or two days later, August 23, you got $40 cash back when you bought groceries at the market down the road.

One day, two weeks or a month later, when you’re trying to reconcile your various accounts using whatever financial software you use, are you really going to remember those seemingly inconsequential events? Probably not. But you’ll stare at the transaction you just downloaded from your bank and say to yourself, “What the hell did I spend $43.50 on? And where the hell is 123 Oak Street?”

If you had treasured that worthless scrap of paper instead of casting it to the four winds, you’d have the answer right in front of you. Instead, you’re beating your head against a wall, wondering why you can’t get a handle on your money.

If you can commit to using some form of financial software, and train yourself to hang onto these receipts, you’ll always have access to the little financial moments that flit through your life.

Get it in your head: You’re a freelancer. This is what you do. You save receipts. Period. This is what I’d like you do, just to get comfortable with this concept. This week, request a receipt for every single transaction you make through your daily life. Don’t just ask for it. SAVE it. If you share income with your partner, ask them to do the same. It’s not really a big deal.

At the end of the day, dump out all the receipts fro your wallet or purse and place them in a dedicated location in your home. Use anything from a paperclip to an inbox to keep the paper tidy.

Later, when you have a chance, use those receipts to catch up on your finances with some kind of financial software, whether it’s a Quicken on your computer, mint.com, or what have you. It’s a tiny little habit to get yourself into, but most people will not take the trouble do it, unless someone tells them to.

Guess what: I just told you.

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Yes, I am trying to post here more often. Thank you for noticing. If you want to sign up for my newsletter and claim your free ebook, go here. Thanks — Joseph D’Agnese

The four, no, SIX bank accounts every freelancer needs

For tax season, I’m running some posts from my old blog pertaining to our book, The Money Book for Freelancers.*

The problems that arise with money and the freelance life are often ones of organization. If you set up your financial accounts properly, your financial goals will be right in front of you every time you check your finances. The way I see it, every independent worker (i.e., sole proprietor) should have at least FOUR bank accounts. I’m just talking about US workers right now.

1. The Spending/Bill-paying Account: The account into which you deposit every check you receive.

2. The Emergency Account: Contains 3 to 6 months of living expenses, if you can swing it.

3. The Tax Account: Collects the money you need to pay your estimated and annual taxes.

4. The Retirement Account: Collects the money you want to contribute to your retirement until you have enough to start investing.

I consider these accounts to be the minimum you must have to run a successful freelance business. Later, when you’re ready to advance, I’d consider adding two more accounts:

5. The Medical Account: Collects money for health insurance premiums, Health Savings Accounts (HSAs), and so on.

6. The Dream Account: Collects money for your future dreams: a house, an apartment, a car, a business, or for your as-yet-unborn children.

This is pretty much the advice we offer in The Money Book for Freelancers. You might think that keeping so many separate accounts is unnecessarily complicated. But we’ve found that if you don’t have a separate place to keep money earmarked for Retirement, say, you won’t save for retirement. You’ll find other, equally important things to spend that money on before you have a chance to save it. The same goes for the tax and emergency accounts. If you don’t consistently save money to pay your estimated and annual taxes, you’ll end up scrambling each quarter or as each April 15th approaches to find the money to cover your tax bill. So separate is smart.

Nearly every bank has some kind of online presence these days, but we like ones primarily based online—such as Ally or Capital One 360—for a couple of reasons:

• Most online banks offer better interest rates than brick-and-mortar banks.

• Most allow you to open a new account at will at any time, so you don’t have to bother making time to visit a physical bank and to talk to a flesh-and-blood bank officer.

• Most allow you to apply a nickname to your accounts.

Little things make a big difference. Imagine logging on to your list of online accounts and seeing them in front of you with nicknames such as “My Rainy Day Account,” “My Waitin’ For the Taxman Account,” “My To-Be-Invested Retirement Account.” Names like this are focused on your specific needs, and far more personal than a list of account numbers that are virtually indistinguishable from each other.

Back in the day, we used to recommend keeping a local bank because it was still necessary to have an institution where you could drop by to deposit a physical check. Back then, the only way to get money into an online bank account was to transfer it from your local bank, or to mail in a paper check, which took daaaaaaaaays. Now almost all these online banks have an app that allows you to scan or photograph your check and deposit it in a flash.

How much should your save from every check? That’s a question for another day. For now, start investigating some good online savings banks at Bankrate.com. You will want a personal checking account for the spending/bill-paying account, and a savings account for the other accounts. US banking rules govern limit your withdrawals or checks you can write out of a savings account to 6 per month, but typically the interest on those savings accounts will be higher than your checking account.

Some savings accounts have an ATM card option, but it’s best to decline ones that do. The more obstacles you can put in your way, the less likely you’ll be to raid those accounts when emergencies occur.

Always check the interest rates. Historically online banks offered better terms than brick-and-mortar banks, but that’s not always the case.

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* This post first appeared on my old blog August 30, 2006.

Yes, I am trying to post here more often. Thank you for noticing. If you want to sign up for my newsletter and claim your free ebook, go here.

10 Things I Learned About William Faulkner and Money

One essay that has stuck with me for years is Eudora Welty’s review of The Letters of William Faulkner. In her hands a picture emerges of Faulkner as a writer doing all he can to make ends meet.

In his lifetime, Faulkner won three major awards that put him in a category of his own—the National Book Award, the Pulitzer, and the Nobel Prize. People want to imagine great writers carefully crafting their work for weeks, months, years at a time. But how much time a writer spends on a piece of work varies greatly. Flannery O’Connor was an incredibly slow writer. But the Faulkner of these letters is a frantic craftsman who cranks out short stories as fast as he can because he desperately needs the money. (By most estimates, he wrote 125 of them, though scholars continue to debate that figure.)

Faulkner nailed down a timeline for cranking them out. He knew, for example, that if he wrote a story in a week, got it in the mail by Friday, that an editor would buy it the following week and he’d have a check the week after. What a charming time to have lived in, when a writer would be paid so quickly!

If you’re interested in how writers really make a living, I urge you to get a hold of Welty’s book, Faulkner’s, or both.

Some tidbits from Welty’s essay:

• Faulkner “hoped to hell” that Paramount Pictures would buy his scandalous 1931 novel, Sanctuary, because when his father died, Mother Faulkner only had enough money to live for a year. “Then it is me,” he writes, meaning that he would then be solely responsible for supporting her. (Paramount released the movie, dubbed The Story of Temple Drake, in 1933.)

• At one point Faulkner's working on two novels at a time, and cranking out one short story a month because he’s got to pay his and his mother’s bills, and he can never rule out the possibility that his brothers and other relatives will hit him up for money.

• He thinks of everything he writes in terms of its earning potential, because, as he says: “By God I’ve got to!”

• At one point, he starts cranking out TWO short stories a week, and he wonders if he can keep up this kind of schedule because it’s killing him.

• To help him out, his New York publishers begin advancing him money. (I’ve read that these sorts of informal arrangements were the origin of the modern-day publisher’s advance, but I don’t know enough about the history of publishing to say more than this.)

• Faulkner goes to Hollywood to make some cash and bitches that the studio contracts are so weaselly that he longs for a relationship built on “good faith and decency,” like the ones he has with editors back in New York.

• He devises a plan to write six short stories, sell them each for a $1,000 apiece to The Saturday Evening Post, and live off the windfall for six months while he writes a book. But he’s freaking out because he’s only been able to sell one of these short stories and that wasted effort can now only be pitched “into the trash.” To hell with fame, craft, acclaim. If a story can’t make him money, it’s worthless.

• His usual outlets were paying him $300 to $400 a short story but the Post was the king at $1,000 a pop. (In the days before television or even radio, a major magazine like The Saturday Evening Post paid so well because its circulation was so vast. Americans had few other outlets for mass entertainment.)

• One year he concocts a crazy scheme to hock his mules and mares to raise some cash but he runs out of horseflesh to pawn.

• At one point he confesses that he doesn’t have a carbon copy of the short story he sent, and can’t afford to wait for his agent or editor’s requested changes because he needs the money too badly. So he rewrites the story from memory, incorporating the edits, and sends it on its way.

There’s lots more, but I think you get the point. Writers write for themselves, and they write for money. Some of the best writers wrote quickly, but that did not taint the work. The stories were just fine because they had talent in spades.

I think of the (only three) creative writing classes I’ve taken or the MFA programs some friends of mine have pursued, and cringe to recall how much time we all wasted talking about how to make a particular story better. That approach can help, but it is purely academic. One takeaway from the Faulkner story is this: You don’t make bad stories better by rewriting them; you write increasingly better stories by writing as often as you can.

Oh—that hastily rewritten piece of crap that Faulkner spat out from memory turns out to have been “The Bear,” one of the most-read and most-anthologized Faulkner short stories, ever.

What a talented son of a bitch. We should all be so money-hungry.

I’ll leave you with one last Faulkner quote: “The man who said that the pinch of necessity, butcher's and grocer's bills and insurance hanging over his head, is good for the artist, is a damned fool.”

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This post first appeared February 22, 2012 in slightly different form on my old blog. I’m repubbing it here in an effort to collect all my significant posts in one place.

Reading and revising this piece reminded me of another writer who famously wrote about money struggles. I should have a post on that up shortly.

In general, I’ve been trying to post more regularly here. Thank you for noticing. If you want to sign up for my newsletter and claim your free ebook, go here.

My Author Earnings

A lot of writers are talking this week about Hugh Howey's AuthorEarnings.com website, which analyzes some data drawn from Amazon to make some interesting observations about the traditionally published versus the self-published world. Another component of the website is a questionnaire asking writers what they earn. I think it will yield some more cool data, the more authors plug in their info.

This comes on the heels of a recent survey conducted by Digital Book World, which found that most authors earn less than $1,000 a year. 

Both studies have their supporters and detractors. Both are shaping up to be controversial in their own ways. I’ve been thinking about releasing some of my own figures for a while now. I’m going to try to do that in this post.

It’s just a little tricky. I daresay the authors debating this stuff right now are predominantly fiction writers, whereas I’m a predominantly nonfiction writer with a background in journalism. Complicating the issue is that a lot of my books were ghostwritten for other people. In other words, I acted as the “Writer” for a more prominent “Author.” In fact, that’s exactly how the two parties are usually designated in the collaboration contracts. I’m the Writer. Some other person is the Author.

Nearly all of these contracts contain confidentiality agreements, so I’m not really at liberty to spell out who I wrote those books for, the money I was paid, what those books were about. So I’m going to be a little coy. But I’m going to try my best to give you the figures because I think they make an interesting counterpoint to what fiction authors are paid. Suffice to say, I’ve been earning more than $1,000 a year, but I’m writing a mix of my nonfiction books and other people’s books. And some of these deals mean that I am entitled to a share of those authors’ earnings for the life of  the book.

Bear in mind that I’ve been supporting myself as a freelance writer—writing newspaper and magazine articles, and books—since about 1997. Since about 2006, a large chunk of my income has come from writing books. The last two proposals I wrote earned the Author and me a gross advance of $100,000 or more. This in a time when advances are at an historical low. In some cases, I wrote these proposals and books alone or with my wife. While I think I’ve grown into a good proposal writer, I can’t ignore the fact that the Author’s platform, brand, prominence, and story almost always accounts for the size of the advance. That said, traditional publishers feel more confident about offering sizable advances when they love the proposal. It’s my job to make them fall in love with the Author’s story.

I have omitted the details of my wife Denise Kiernan’s bestselling book from this list. These are only books I have been a party to. The list is a mix of my own books, ghosting gigs (where I wrote the proposal that sold the book and received both a percentage of the royalties and advance), and work-for-hire projects where I just wrote the book for a flat fee.

Sometimes I wrote the proposal but the book didn’t sell and the Author stiffed me on the proposal fee. Many times I spend hours on the phone conferencing with a potential Author, only to have the project dry up and blow away. It’s just the nature of the business.

The clock on these books starts in 2002 and ends in 2014, with a ghost gig I’m about to undertake…

GHOST GIGS

* My first ghost gig: 2002. Big 5; work-for-hire, $25,000 flat fee, no royalties. Editor: “It’ll only take 5 months, tops.” It takes a year, and the demands on my time costs me lots of other freelance work.

* Sports book ghost gig: Sold via proposal. Big 5; 40% of advance and royalties. Our share to write book: $62,000.

* Nonfiction ghost gig: Sold via proposal. Big 5. 50% split of advance and royalties with Author. My share to write book: $50,000.

* Health book ghost gig: $5,000 to write the proposal for a book already written by the Author. No advance or royalties.

* Business book ghost gig: About to be sold via proposal. $10,000 proposal fee. Big 5. 40% share of advance/royalties; 42.5% if my proposal lands a deal in excess of $150,000. Guaranteed minimum: $40,000 to write book.

WORK-FOR-HIRE

* Adult nonfiction book: $3,000 advance, token (2%) royalties.

* Adult nonfiction book: $25,000 flat rate, no royalties.

* Adult nonfiction book: $50,000 flat rate, no royalties. Client: “This will take a few months.” It takes three years.

* Adult nonfiction book: $10,000 flat rate, no royalties.

* Adult nonfiction book: $7,500 advance, token (1%) royalties.

* Hollywood book gig: Big 5. $12,000 to write book. No royalties.

* Adult nonfiction museum book: Work-for-hire. $15,000 flat rate, no royalties.

* Nonfiction business book: $12,000 flat rate, no royalties.

"MY" BOOKS

* Kids’ book 1: Proposal. Advance of $2,250 each, to myself and a my co-author, with a standard paperback royalties split between both of us.

* Kids’  book 2: Sold on the basis of a proposal and a finished book. Big 5; $5,000 advance for me, standard hardcover royalties (5% and 5%) split with illustrator.

* Adult nonfiction book: Sold via proposal. Big 5; $40,000 advance, standard paperback royalties.

* Adult nonfiction book: Sold via proposal. $10,000 advance, standard hardcover royalties.

* Adult nonfiction book: Sold via proposal. $12,000 advance, standard hardcover royalties.

CONCLUSIONS

Actually, I’m not sure what conclusions you can draw from all this. In general, having gone through the fiction submission process, the advances on work-for-hire and ghost gigs tend to yield better advances, which is why I keep doing them.

Publishers tend to be willing to part with more money when they think the Author has a name or brand that will propel them into the media, or they think the subject is unusually compelling. That’s why some of these are in the mid-five figures. These figures also reflect my gross; subtract 15% agenting fees from all these figures. These payments were also paid in halves, thirds, and fourths. For at least three of these books, we have not yet received final payments because the paperback has not yet been published.

Would I like to be writing my own fiction? Sure, but in the same way that a lot of fiction writers have day jobs, my day job is writing books for other people.

For more on what ghostwriting entails, I’d refer you to this interview with agent Madeleine Morel. I have met Ms. Morel, a ghostwriting specialist, but she is not my agent.