10 Practical Steps to Manage Your Finances as a Writer
Written by  Daisie Team
Published on 11 min read


  1. Assess your financial situation
  2. Create a budget
  3. Set financial goals
  4. Plan for taxes
  5. Establish an emergency fund
  6. Manage debt effectively
  7. Plan for retirement
  8. Insure your biggest asset - You
  9. Invest in continual learning
  10. Regularly review and adjust your financial plan

One of the most challenging aspects of being a writer is figuring out how to manage finances. Not to worry, though - you're not alone in this predicament. Here are 10 practical steps that can help you navigate the financial landscape of a writer's life. From budgeting to tax planning, these tips are designed to help you take control of your financial future.

Assess Your Financial Situation

Before you can begin to manage your finances as a writer, you first need to know where you stand. This is the starting line of your financial journey—it's like opening up a book to the first page. Here's how to assess your financial situation:

1. Calculate your income: As a writer, your income might come from different sources—book royalties, freelance gigs, or a full-time job, to name a few. Combine all these to know your total income.

2. List down your expenses: You need to know where your money goes. Include everything—rent or mortgage, utilities, groceries, transportation, and don't forget those lattes you love so much.

3. Determine your net worth: This might sound like a big deal, but it's just subtracting what you owe (debts) from what you own (assets). A positive number means you're doing alright; a negative number means there's room for improvement.

4. Understand your cash flow: This is the money flowing in and out of your pocket. If you have more money coming in than going out, you have a positive cash flow. If it's the other way around, it's time to tighten the belt a bit.

By doing these steps, you'll have a clear picture of your financial situation. Remember, no matter where you are right now, it's okay. You're just starting the journey to learning how to manage finances as a writer, and every journey begins somewhere. The important thing is that you're taking the first step.

Create a Budget

Now that you have a clear picture of your financial situation, the next step in managing your finances as a writer is creating a budget. This is your financial road map—it helps you navigate from where you are now to where you want to be.

1. Estimate your income: As a writer, your income might not be the same every month. That's okay. Estimate your average monthly income based on what you earned in the past six months to a year. If you're new to writing, make a conservative estimate.

2. Allocate for necessities: Start by setting aside money for the basics—housing, food, transportation, and health care. Ideally, these should take up no more than 50% of your budget.

3. Allocate for wants: Yes, you read that right. It's okay to spend money on things you enjoy. That new book by your favorite author? That writing retreat in the mountains? They're all part of the budget. Just make sure they don't exceed 30% of your budget.

4. Allocate for savings and debt repayment: The remaining 20% should go towards savings and debt repayment. This includes emergency funds, retirement savings, and paying off any debts you might have.

Congratulations! You now have a budget. Remember, a budget is not set in stone. It's more like a draft of a book—it's flexible, and it's okay to make adjustments as your situation changes. The key is to keep track of your spending and make sure it aligns with your budget. This is a crucial step on how to manage finances as a writer.

Set Financial Goals

The next step in managing your finances as a writer is setting financial goals. Goals provide direction—they're like a plot or storyline in your financial journey. Without them, you might end up like a character lost in a novel, unsure of where to go or what to do next.

1. Identify your goals: What do you want to achieve with your money? Perhaps you want to save up for a new laptop for writing, pay off your student loans, or even purchase a house. Your goals are unique to you—there's no right or wrong answer.

2. Prioritize your goals: Not all goals are created equal. Some are more urgent or important than others. For example, building an emergency fund for unexpected expenses might take precedence over a vacation. Prioritize your goals to help guide your financial decisions.

3. Make your goals specific: A goal like "save money" is vague. But a goal like "save $5000 for a new laptop in two years" is specific. The more specific your goal, the easier it is to plan and stay on track.

4. Set a timeline: Each goal should have a deadline. This adds a sense of urgency and makes the goal seem more real. Plus, it helps you figure out how much you need to save or pay off each month to achieve your goal.

Setting financial goals is a key component of knowing how to manage finances as a writer. It's like writing a novel—you need a clear plot and timeline, and you need to stick to them to reach the end successfully. And remember, it's okay to revise your goals as your circumstances change.

Plan for Taxes

As a writer, dealing with taxes can feel like trying to understand a complex plot twist in a thriller—it might seem confusing and overwhelming. But just like a plot twist, once you understand it, everything falls into place.

Income from writing is taxable, even if it's freelance or contract work. Here are four steps to ensure you're planning for your taxes effectively:

1. Understand your tax obligations: As a writer, you're likely self-employed. This means you need to pay self-employment tax, in addition to income tax. That's a twist most don't see coming!

2. Keep track of your income and expenses: Just like you would keep track of characters and events in your story, keep a record of all your writing income and expenses. This can help you figure out your taxable income and identify potential deductions.

3. Set money aside: Unlike a regular job where taxes are automatically deducted, when you're self-employed, the responsibility is on you. A safe practice is to set aside a portion of your income for taxes. It's like writing a cliffhanger—you're preparing for what's to come.

4. Consider getting professional help: Taxes can be complex. Don't hesitate to seek help from a tax professional. They can guide you through the process, just like a good editor can guide a writer through a tricky plot point.

Planning for taxes is a crucial part of managing your finances as a writer. It might not be the most thrilling part of your story, but it's certainly an important one. And remember, just like a good plot twist, once you've got it figured out, you'll feel a sense of accomplishment.

Establish an Emergency Fund

If you've ever written a character into a corner and wondered, "Now what?", you'll understand the value of an emergency fund. It's your plot twist saver, your safety net, your 'get out of jail free' card when life throws unexpected expenses your way.

As a writer, your income can fluctuate. One month, you might be the bestselling author; the next, you might be waiting for your next contract. An emergency fund can help you navigate these ups and downs without stress. Here's how you can build one:

1. Start small: You don't need to have a mountain of savings right away. Even a small amount set aside can make a difference. Consider it like writing a novel—you start with one word, then one sentence, then one paragraph. Before you know it, you've got a whole chapter.

2. Make it a habit: Regularly setting aside money into your emergency fund is key. It's like writing every day—it might not seem like much at the time, but over days, weeks, and months, it adds up.

3. Keep it separate: Your emergency fund should be separate from your regular checking account. It's like keeping your drafts separate—you don’t want to dip into your emergency fund unless you really have to.

4. Aim for 3-6 months of expenses: A good rule of thumb is to save enough to cover 3-6 months of living expenses. It's like having a few chapters in reserve—it gives you breathing room.

Remember, an emergency fund is not a luxury—it's a necessity. Just like a good plot twist, it can change the game when you least expect it. And when it comes to knowing how to manage finances as a writer, it's an invaluable tool in your arsenal.

Manage Debt Effectively

Like a plot that's gotten tangled, debt can seem overwhelming. But just as you would unravel a complex storyline, managing debt involves breaking it down into manageable parts. The keyword here is 'manage'. It doesn't mean you have to pay it off all at once, but rather create a plan that allows you to handle it effectively. So, how do you manage finances as a writer and deal with debt? Let's explore:

1. Understand Your Debts: It's hard to solve a problem if you don't fully understand it. Knowing exactly how much you owe, to whom, and the interest rates can give you a clear picture of your debt. Think of it as character development—knowing every little detail about your character before you start writing.

2. Prioritize Your Debts: All debts are not created equal. Some have high interest rates, some have larger balances. Prioritizing your debts—paying off high-interest ones first—can save you money in the long run. It's like focusing on the main storyline before adding subplots.

3. Make Regular Payments: Consistency is key. Making regular payments, no matter how small, can keep the debt from growing and show creditors that you're serious about paying it off. It's like writing daily—it keeps the momentum going.

4. Avoid Adding More Debt: It can be tempting to use credit cards or loans to get through tough times. However, adding more debt can make the situation worse. It's like adding more plot twists when the story is already complicated—it only leads to confusion.

Managing debt is like crafting a well-written story. It requires patience, a clear plan, and consistent effort. But once you've got it under control, you'll feel like you've written 'The End' to a particularly challenging chapter in your financial life.

Plan for Retirement

As a writer, your mind is often filled with exciting plots and compelling characters. But have you ever considered the story of your own future, specifically your retirement? Just as you plan the arc of your novel, you need to plot your financial journey towards retirement. So, how to manage finances as a writer with an eye on retirement? Here are some practical steps:

1. Start Now: The best time to start planning for retirement is right now. The earlier you start, the more time you have to grow your savings. It's like brainstorming for a book idea—the sooner you start, the more polished the final product.

2. Save Regularly: Set aside a portion of your income for retirement. Whether it's a small amount from each freelance gig or a percentage of your book royalties, regular savings can add up over time. It's similar to writing every day—each word contributes to the completion of your novel.

3. Diversify Your Investments: Don't put all your eggs in one basket. Diversify your investments to spread risk and increase potential returns. It's like writing in different genres—it broadens your scope and opens up new opportunities.

4. Use Tax-Advantaged Retirement Accounts: Take advantage of retirement accounts like Individual Retirement Accounts (IRAs) or 401(k)s that offer tax benefits. It's like using a thesaurus—it adds value and enhances your outcome.

Remember, retirement planning isn't a subplot in your financial story—it's the climax. And just like a well-written ending can leave a lasting impact, a well-planned retirement can ensure a comfortable and fulfilling future.

Insure Your Biggest Asset - You

As a writer, your most valuable asset might not be your laptop or your cherished collection of reference books. Surprisingly, your most significant asset is you—your ability to create and weave words into meaningful stories. So, how to manage finances as a writer while ensuring this precious asset?

1. Health Insurance: The first step is to get health insurance. Medical emergencies can strike when least expected, leading to significant financial strain. Writing, while not physically demanding, requires a healthy mind and body. A good health insurance policy helps you tackle unexpected medical expenses and provides peace of mind, so you can focus on your craft.

2. Disability Insurance: Writers depend heavily on their physical abilities to type and their mental capacities to create. Disability insurance can replace a portion of your income if you're unable to work due to a disabling injury or illness. So, just as you back up your work on an external hard drive, back up your income with disability insurance.

3. Life Insurance: If you have loved ones who depend on your income, life insurance can provide financial support to them in the event of your untimely demise. It's a bit like writing a will for your characters, providing them with a safety net.

Remember, insurance is not a cost; it's an investment—a safety net that protects you and your loved ones. As a writer, you insure your characters against plot twists, so why not insure yourself against life's uncertainties?

Invest in Continual Learning

So, you've written your first book, or maybe you're a seasoned writer with several titles under your belt. But how to manage finances as a writer and continue to grow professionally?

One word: learning. In the ever-evolving world of writing, there's always something new to discover. Investing in continual learning is like feeding your creativity—it keeps your writing fresh and engaging. Here are a few ways you can invest in your development.

1. Writing Courses: No matter how good you are at your craft, there's always room for improvement. Consider taking writing courses to hone your skills. This could range from creative writing workshops, to technical writing classes, or even marketing and publicity courses. Each new skill you acquire is another tool in your writer's toolbox.

2. Book Clubs and Writing Groups: Joining a book club or a writing group is a great way to learn from others, get constructive feedback, and stay motivated. Plus, it's a great way to meet like-minded individuals who understand your passion for writing.

3. Reading: As a writer, reading is one of the best investments you can make. It expands your vocabulary, exposes you to different writing styles, and keeps you informed about trends in your genre. Remember, a writer who doesn't read is like a chef who doesn't eat.

Investing in continual learning is investing in your future as a writer. It keeps your skills sharp, your writing relevant, and your readers engaged. So, keep learning, keep growing, and keep writing!

Regularly Review and Adjust Your Financial Plan

Do you remember when you first learned how to ride a bike? You didn't just hop on and start pedaling. There was a constant process of adjusting your balance, your speed, and your direction. Managing finances as a writer, or in any profession, is much the same.

Life happens, things change, and your financial plan should adapt accordingly. Here are a few tips to keep your financial plan on track:

1. Check in Regularly: Make it a habit to review your budget, savings, and investments at least once every few months. This way, you can catch any issues early and make necessary adjustments.

2. Keep an Eye on Your Goals: Are you moving closer to your financial goals or further away? If your goals seem out of reach, don't be discouraged. It might be time to reassess and adjust your strategies.

3. Adapt to Life Changes: Got a raise? Great! Time to save more. Had a baby? Congratulations! Now, let's adjust your budget. Whether it's a change in income, family size, or lifestyle, your financial plan should reflect your current reality.

4. Seek Help When Needed: If managing your finances feels overwhelming, don't hesitate to seek help. A financial advisor can provide guidance and help you stay on track.

Remember, the key to managing finances as a writer—or in any profession—is not just setting a financial plan but regularly reviewing and adjusting it. Just like in writing, the first draft is rarely the final one. So, keep tweaking, keep adjusting, and keep moving toward your financial goals!

If you're looking to further develop your financial management skills as a writer, we highly recommend checking out Kelsee Thomas' workshop, 'A Freelance Artist's Guide At Making Finances Make Sense.' In this workshop, you'll gain valuable insights and practical advice on how to manage your finances as a freelance artist, ensuring you can focus on your craft without any financial stress.