Wanna get rich?

I should start by saying that I’ve been wanting to blog about this topic for a while now, and I just realized that it probably makes a pretty good follow-up to yesterday’s freak out about my three jobs.

So…let’s talk money!

We all know that writers have to be good with words, but it doesn’t hurt to be good with money, too, because there’s no such thing as a regular paycheck when you write fiction.

Authors earn money via royalties. Some of the money comes in the form of an “Advance against royalties”, or advance for short.

You will know what your advance will be when you sell your book. Some advances are for millions of dollars, but usually advances are between five and twenty thousand. (Some even lower.)

This is money that your publisher pays you (usually spread out over time). It’s your money (excepting what you pay your agent and the IRS). No matter how the book sells you won’t have to give this money back.

But if the book doesn’t “earn out” the advance then you won’t get any more money.

Let’s do an example:

You write a very cool book and get a very cool agent who sells it to a very cool editor who wants to publish it in paperback and build your career slowly. That’s very cool—a lot of megabestsellers have started out that way.

They offer you a $10,000 advance and promise to pay you royalties in the amount of $1 per book for every book they sell.

(Note: these numbers were chosen purely for the purpose of easy math, not publishing statistics!)

So that means that your publisher will pay you $10,000, usually in two or three payments.

The first thing you do is pay your agent (usually 15%). Then set some aside for the IRS (this is uber-important!!!!)

This is all the money you will get unless you “earn out”, or sold 10,000 books. If you sell 10,002 then your publisher should owe you two additional dollars.

Make sense?

But here’s the kicker: you may never sell another book.

Your first book may not earn out and the publisher might not want to publish you again. Or the genre as a whole might be in a slump (think chick lit recently). Or maybe you just don’t have anymore really great ideas. All these things happen all the time.

So when people ask me why I haven’t quit my dayjob, that’s the answer I have to give—I’m afraid. Period.

Also, I’m well aware of a little principle called the Time Value of Money.

For my dayjob (and this can be a nice clue to all of you playing the “guess what Ally’s dayjob is” game over on MySpace), I work with money, and let me tell you, time is a huge factor in growing wealth.

What’s worth more to you a dollar today or a dollar tomorrow? Today, right?

You might need to buy something on the way home from school… Your friend who owes you the buck could get hit by a bus tomorrow morning and never pay you… Or, my favorite, you could put that dollar in the bank and have it drawing interest.

Compounding interest is a wonderful, wonderful thing!

By saving my book money when I’m still pretty young, that money just sits in savings, drawing interest. And then because I still have my dayjob, I don’t touch it, so I’m drawing interest on the interest. Then interest on the interest on the interest.

Oooh. It’s so fun! All kinds of money—multiplying! And the longer it sits there the more it grows!

When people hear that I optioned a book to Disney they have a hard time believing that I drive a car that has 80,000 miles on it. I’m currently wearing shoes that I’ve had for five or six summers (and have just started to fall apart, darn it!) And I still have a dayjob (but just one, now, because I’m standing firm on my no-more-consulting vow!)

But I still have my book money.

And it’s reproducing!

Some people make a lot of money writing books. Some people make a lot of money playing baseball, too, but that doesn’t mean it’s something everyone can do.

The easiest way to make money is to take care of the money you earn.

--Spend it on things that will last (like shoes that will last five or six years instead of ones that will fall apart by the end of the summer).

--Set aside money for savings before you go shopping and vow to just save whatever’s leftover.

--And, most importantly, start saving early. Let your money work for you!

Through preaching now—I promise!

Ally

PS…I’m writing this for all you teens because, sadly, a lot of grownups learn this lesson waaaaay too late!