A writing budget is a very important tool for a writer to help separate personal and business expenses, especially if you have the slightest of intentions on making money with your fiction writing. When you intend on selling your books after they are published, you transition yourself into a writing business whether you like it or not. As difficult as that sounds, it's really not as hard as it seems.
A budget for writing, like any other budget out there, is a powerful and important tool you can use to keep the costs for your writing under control so you can keep on track throughout the entire writing process from the idea to publication.
When is the optimal time to start creating your writing budget? The best time to start an effective budget is the moment you start thinking about your first novel. This rarely happens, so if you are already beyond that stage, developing a budget now is the best thing you can do to ensure you have the available money when you need it for various functions associated throughout the writing process.
What should you consider when you create a budget for writing? Well, if it involves any process of your writing such as writing materials, computer, printer, marketing materials, publishing, editing, book cover design and any other actions that tend to cost money, it is considered a "business" expense. If you make money from anything to do with your writing, it is referred to as an income or royalty related to your writing.
Most writing income is treated as a royalty, so it is taxed differently from your regular income with your federal and state income tax returns. You should seek legal tax advice from a qualified attorney or accountant in order to fully understand about how taxes work with a sole proprietorship type of business.
Once you decide to make money with your books, your writing is a business whether you like it or not. It may not be a huge business, but it is a business all the same. If you combine your personal budget with your business budget, you are asking for financial trouble.
Combining the two separate budgets will make you to dip into your own money that feeds you and your family, potentially putting a strain on your personal life. Your personal budget will eventually become unmanageable and you will come up short when you need to hire an editor, have a critique done, or when you need to purchase a new computer when your trusting ten year old computer dies.
As with any business, you will create a writing budget based on your business's needs, now and in the future. If you are just starting out (the idea stage), you need to look out into the future for your business and plan out expected future expenses that may relate to your writing.
Where do you want your writing business to be one month from now, six months from now, a year from now and so on? You know, your writing goals!
What equipment are you going to need to begin writing?
What fiction writing software are you going to need to help smooth out your writing? How much will you have to set aside every month to afford to pay for a critique or professional editor?
How are you going to fund your writing business at the beginning? This is a big one because if you are just starting out, you have writing no income coming into your new business. You must consider how you are going to fund your writing budget until such time that it is going to fund itself (when you start making money by selling books or writing services), then eventually pay you once you break even with your writing expenses.
When you establish a writing budget, you will be able to estimate how much you need to invest in your business in order to meet your goals and expectations every month for years in the future.
Remember to always keep your writing budget separate from your personal budget.
In order to help you get started with your writing business, I've created a sample writing budget template to help you put one together for yourself. Your budget should be drafted for monthly tracking and yearly tracking. Once you get your monthly budget created, make a similar budget for income and spending for the entire year based on your monthly estimates. Or if you prefer, you can work backwards doing a yearly budget first then working back to a monthly writing budget.
Please download a blank copy of the monthly writing budget template with directions so you can create the budget that will work for your writing business.
By downloading the budget form above, you can create your own budget based on the variables that every writer should include in their accounting each month. It includes a set of instructions to help guide you through everything so you can easily budget out for several years if you would like.
You have permission to print the budget work sheet in order to help you develop your fiction budget. It includes all of the fields in the sample budget below.
TOTAL INCOME: __________ (total of all writing incomes)
Income from Writing: _______ (total income from writing)
Income from Affiliates: _______ (total affiliate income)
Income from Advertisers: _______ (total advertiser income)
Personal Investment: ________ (total money you pay into your writing business so it can run - when starting out and when no other income is present)
TOTAL EXPENSES: ______________ (total of all expenses)
Consumables: _________ (Items such as pens, paper, or ink cartridges that must be replaced occasionally.)
Equipment: _________ (Stuff like computers, printers, laptops, binding machines...)
Required Services: _________ (If you hire outside help for your writing such as an editor, proofreader, web hosting, domain name registration, or ghostwriter.)
Advertising: _________ (Online and offline ads, magazines, flyers, brochures, business cards, pay per click, book signing props...)
Entertainment: __________ (Writing related dinners, luncheons, functions...)
Travel: __________ (Expenses that are incurred while traveling for your writing.)
Owner Draw: __________ (This is the amount you personally take out of your business once your business is profiting enough to become self-sufficient with plenty of surplus.)
Surplus/Deficit: __________ (Surplus is a positive amount left over after expenses are taken away from income. Deficit is a negative number after expenses are taken away from income.)
Allocation of Surplus: ___________ (where you put the money left over each month - savings, checking, money market, reinvest back into your business.)
This is just a basic writing budget to get you started and to show you some of the particular incomes and expenses to expect from your writing business. You can add more items to your budget at any time to make it more customized to your actual situation.
Taxes for your writing business aren't that bad either. Since you are the business, you can easily add in your business income and expenses to your Federal and State Tax Returns. See a tax professional about all of the deductions you can make for business expenses.
For more information on budget and finance for your writing business or if you need help to create a writing budget, I created an entire website about how to make a budget that can help you through the entire process.