With this month’s Spilling the Tea column we are talking author finances with Katherine Locke! Katherine chats about advances, earning out, their thoughts about day jobs and much more. Be sure to check out Katherine’s YA historical This Rebel Heart.

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Say an author gets a $100,000 advance, can you explain how those payments would be paid out?

Great question. Let’s start first by defining “advance” for those who don’t know what it means. Advance is short for “advance on royalties.” This means that the publisher is giving you money upfront and whatever the book earns in royalties is counted against that advance. This means that if you’re given a $100,000 advance, you won’t earn any more money on the book until it’s earned over $100,000 in royalties. That’s what is called “earning out.” It’s really important to know that many books do not earn out—but that doesn’t mean they aren’t profitable! Publishing math is weird math.

Back to the question. Advances are typically paid out (mostly) in advance of publication because it’s an advance on royalties, before the book earns royalties. These are typically split into three or four payments. Some publishers are going with five or six payments now, but let’s stick with the three and four payment scenarios for this since they’re still the most common.

In a three-payment scenario, you would get one-third on signing, one-third on delivery and acceptance (typically this is when the book is sent to copy edits or through copy edits), and one-third on publication. Since books typically publish about two years after selling, these payments are over two years.

Say you sold a book for 100,000 in April 2023. Contract negotiations and signing can take awhile. So you might sign the contract in August (I’m being optimistic here.)

So you’ll receive $33,333.33 in September 2023. Fifteen percent of that goes to your agent. You should set at least 30 percent aside of that for taxes. So out of that first payment, you have $18,333.33 left.

Your second payment comes on delivery and acceptance (commonly called the D&A payment). When this arrives depends on you and your editor. Let’s just say that you and your editor are both very on the ball and your edits are completed and you’re off to copy edits by April 2024. You’ll get another $33,333.33, take out your agent’s earnings and your taxes, and you’ve got another $18,333.33 left.

Your final payment is on publication. On the schedule we’ve laid out, your book isn’t coming out until Spring 2025. So in April 2025, you’ll get another $33,333.33, and then after your agent and taxes, you’ll have $18,333.33 left.

For a four-payment scenario, you’ll see it divvied up this way: one-fourth on signing, one-fourth on delivery & acceptance, one-fourth on publication, and one-fourth six months to 12 months after publication, depending on your contract. So it’s the same scenario, smaller checks, and a longer waiting time between checks. Your checks would be $25,000 to start, and $13,750 after agent commission and taxes. You’d also see payments in September 2023, April 2024, April 2025, and October 2025 on a four-payment schedule where your final payment would be six months after advance. If it’s twelve months, you’d get that money in September 2023, April 2024, April 2025, April 2026.

$100,000 is a lot of money. And $13k checks are nothing to sneeze at. But when that $13,000 check has to last you a year, at the least, before your next $13k check…you see why authors often have to have multiple income streams in their household!

Can you give some general examples of what kind of advances debut authors can expect? (We know it varies so much especially via genre!)

Advances vary so much by genre and by house. You’re going to see advances as low as $500-$1000 at smaller independent houses and advances over six figures at bigger houses for some debuts. It’s all over the map. In general, I think debuts typically get somewhere between $7500 and $35,000 for their debuts. It’s hard to say what the true average is and that also changes with the economy and trends. It’s very, very, very rare to get “quit your day job” money for your debut. I think it’s important to remember that there are many award-winning and super successful books that got low advances. Low advances do not correlate with a book’s worth, value, or even the potential readership.

Can you explain how earning out and royalties work? And generally how often books earn out? 

Earning out means that your book has made back the advance that the publisher paid you. So if you got a $100,000 advance, your book has earned $100,000 in royalties. It’s important to remember that this is an advance on royalties, and so your royalties are what count here. Not the total amount of money the book made for the publisher, but the royalties the book earned you as the author. So let’s say that your royalty rate is 6% on a hardcover book. That means if your book sells for $17.99, you earned $1.08 off that book, and that gets put against your advance of $100,000. Royalty rates vary for type of book (hardcover, paperback, ebook) and for size of sale (for instance, for bulk sales for things like a book box or a book club, you may have a lower royalty rate). It takes a lot of sales to earn out, and most books do not earn out. That doesn’t necessarily mean that the book wasn’t a success for a publisher! Lower advances can sometimes mean that it’s easier to earn out because the number of books needed to hit that threshold is lower.

Can you explain how authors must handle taxes and finances, like estimated taxes, and if a special accountant is needed? 

Author income is reported as self-employment income. Your agency and/or publisher will issue you a 1099 for your earnings and you have to include that in your taxes and pay the IRS and your state what you owe. I highly highly recommend an accountant who is comfortable with creative people’s income or publishing or self-employment income at the least. This will help you figure out how to save money, protect your assets, etc. For instance, many authors find making an LLC or S-Corp to be a helpful way for them to save money while also providing them some privacy and security. This can vary state by state depending on state laws and regulations. I would highly recommend reaching out to other authors in your area and finding out who they use for an accountant or tax prep who may be able to help you figure out the best management for your books, income level, etc.

Many writers dream of quitting their day job to write full time. In your opinion, what financial safeholds should be in place before making this move? 

I’m on book …15? 16? Something like that. And I have a day job. I don’t know when/if I’ll ever be able to quit my day job. In a lot of ways, my day job affords me a level of comfort and relaxation I know my full-time writer friends don’t have: I know exactly what days of the month I’m getting paid. I don’t have to budget by saying, “Sometime between September and December, I might receive a check and it should be for $13,000 but it might not be.” For me to feel comfortable trying full-time writing, I’d want a full year’s salary in the bank before I quit. A complete one year safety net. Maybe even more. I’m single (and intend on remaining so) so I don’t have another partner to lean on for financial security or for health insurance. I can’t afford to pay for health insurance out of pocket, even with the ACA.

Before quitting your day job, sit the adults in your household down (be that partner(s), other family, roommates, etc.) and go over the math. Do you have wiggle room if your publisher is not great at paying on time? An alarming number of publishers are bad at paying on time! Do you have wiggle room if you don’t sell a book next year and thus don’t get an advance check next year? Do you have savings for a health emergency? Especially if you’re in the United States or any country without a good healthcare safety net, this is important to think about. Also think about retirement accounts and savings accounts!

I also think that there’s this perception that quitting your day job is a mark of success in authorland. That this is how you know when you’ve made it. That this is the Goal. I’m guilty of thinking about this too.

But there’s nothing wrong with keeping a day job. I have found that financial instability is the greatest threat to my own creativity. I can’t write at my best when I’m stressed about finances. I have multiple health issues that require regular doctor care and health insurance is a top priority for me.

It’s not a failure to keep your day job. It’s not a failure to keep your day job for any reason. Keep your day job because you like the steady income. Keep your day job because you need health insurance for any reason. Keep your day job because it has great benefits. Keep your day job because you like structure. Keep your day job because you genuinely enjoy and love your day job!

I know authors who’ve gone back to their day jobs. Some because they can’t afford not to, and some because they found themselves craving the regular schedule and routine, and some because it turns out sitting alone in their house with nothing but the book in their head wasn’t super healthy. I also know authors who’ve written their best books in the years immediately after quitting their day job opened them up creatively. Some of them were able to quit because their partners/spouses were able to support them and some of them because they had multiple income streams and some of them because their previous books made it possible.

All of this to say that you need to make sure you can risk quitting your day job, but don’t quit it for the wrong reasons, because you think that this is how you, or other people, will know you’re a successful author, or because you think that this is the Goal that every author aims for.

And don’t forget to set aside enough of your income for taxes. The IRS doesn’t care about creativity. And you can’t pay them in vibes. Sadly.

What expenses are involved in being an author? Agent / publicity & marketing / conventions, etc.? 

The expenses involved in being an author vary, and I cannot emphasize this enough: you do not have to pay for more than you can afford. And that can be nothing. Your agent gets paid when you get paid, and they take their commission before they pay you, so you don’t have to write them a check other than mentally accounting for their commission when you are budgeting out your advance checks. You can get a cheap website (every author should have a website!!) or you can keep your FIRSTNAME.Wix.Com type of website URL. That’s okay! There’s no rule that says you have to own your domain.

If you do decide that you want and can spend a little money on your career, a website domain is a good place to start. I’d start there before anything else. Beyond that, what your publisher pays for and what you pay for for marketing/publicity varies. In general, if your publisher pitched you for something, they should pay for you to get there and stay there. If your publisher’s inviting you to something, they should pay for you to get there and stay there. If you’re pitching yourself to festivals and conventions, talk to your publisher first and find out if they can support you in any way. Sometimes they say that they can pay for your hotel but not for your flights or visa versa. Early in my career, I spent a lot of my first advance getting myself places and promoting myself. I don’t regret doing that, but I also could do it because I had another job that was flexible with remote work and I was getting a regular paycheck. I don’t think every author should have to do this.

I will also say that you don’t know what you don’t ask for. Ask your publisher early about things like bookmarks or postcards and preorder campaigns. The worse they can say is no. But often for things like bookmarks and postcards, they can cover it or cover part of it, like the design and you get them printed or something like that. There’s nothing wrong with asking for help.

I will say it’s important to be mindful of ROI (return on investment). And that ROI isn’t strictly monetary. I think a lot of the time I took off and money I spent early in my career traveling places and doing my own mini regional tour was helpful for the bookseller connections I made. I didn’t sell a ton of books at those events, but I made a lot of great connections.

Think also about the free things you can do. Social media is a bit of a hot mess these days and an ever-changing landscape, but it’s still free in most cases. Networking’s free. Team up with fellow authors to travel somewhere or save on a hotel or pitch yourselves as a panel, or put in a bulk order for bookmarks or other swag for a festival.

I’d be remiss if I did not remind people that they should not be paying to get published. You do not pay an agent out of your own pocket. You do not pay for your book to be published by a publisher. Keep an eye out for scams like that. Reputable publishers pay you. You don’t pay them.

Are there any financial resources, online or otherwise, we can point authors toward?

Look for grants and scholarships! WNDB for instance has several. Highlights Foundation has great scholarships for its classes and workshops and personal retreats and I highly recommend taking advantage of those. Highlights is a special place. Check out your local community organizations, especially arts councils etc. Sometimes micro grants are available. Five hundred dollars can go a long way to paying for a hotel for a weekend away for a writing retreat or helping with childcare so you can get some writing done or keeping groceries in the fridge. If there’s a workshop or webinar you think will help you grow as an author and it’s out of reach, reach out to the organizers and find out if there are scholarships or grants available for attending.

Final thoughts?

There’s a lot of shame around money in our society, and that includes in publishing. We talk and joke about the hustle, but we don’t talk about how hard the hustle is. And how we need to hustle multiple jobs to keep ourselves and our families fed and the lights on, but how draining that is on our creativity and our work. When my first books came out in 2015, my utilities were turned off. I had no electricity and no hot water and no internet. I wrote and edited my second book at Starbucks for the heat, the internet, and for the hot water with lemon that they gave me for free. It was not my best work. I was not feeling my best self. And I was too ashamed to tell anyone or ask for help. Talking about money, what we get paid, how we get paid, when we get paid, and how to be your best creative self while also living safely is important to me.

I want publishing to be more transparent about how hard it is to make a living and survive in this industry on book money alone. I want all of us to stop treating advances as a hierarchy with writers who get lower advances missing out on networking opportunities, festivals and conventions, and educational opportunities. I want us all to understand that making writing into a day job and leaving traditional day jobs is a personal decision with many, many factors behind it, both visible and invisible, and there is no moral judgment on staying in a day job for any reason.

Also, capitalism sucks.

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Katherine Locke lives and writes in Philadelphia, Pennsylvania with their feline overlords and their addiction to chai lattes. They are the author of the critically-acclaimed This Rebel Heart, The Girl with the Red Balloon, a 2018 Sydney Taylor Honor Book and 2018 Carolyn W. Field Honor Book, as well as The Spy with the Red Balloon. They are the co-editor and contributor to This is Our Rainbow: 16 Stories of Her, Him, Them and Us, which had three starred reviews and made Kirkus Review’s Best Middle Grade of 2021 list, as well as It’s A Whole Spiel: Love, Latkes and Other Jewish Stories. They also contributed to Unbroken: 13 Stories Starring Disabled Teens and Out Now: Queer We Go Again. They are the author of picture books Bedtime for Superheroes, What Are Your Words? A Book About Pronouns, and Being Friends with Dragons. They can be found online at KatherineLockeBooks.com and @bibliogato on Twitter and Instagram.