Why It’s Good to Have a Day Job

This week we paid out what is known, in technical terms, as a “buttload” of taxes. First, as we did well last year, we paid a fairly not small sum that we owed despite paying our quarterly taxes in a diligent fashion (when one is self-employed the government makes you pay out every three months, because you can’t be trusted to make a lump sum payment, apparently). Then we paid our quarterly estimated for the first three months of this year too, which was an amount pretty much equal to that first bit. In a word: Yow. Bye-bye, money.

The good news is that because my wife is such an excellent steward of our finances, we were able to pay both sums without discomfort and still have a good amount left in our savings (we use the savings as our “cushion” — our actual savings are our IRAs and 401(k) accounts). But having taken a large sum out of the savings, it is now below the cutoff line for which Krissy begins to feel itchy. I personally think her financial worry line is pretty high as these things go. But then, there’s a reason I’m not in charge of the household finances, and I’d rather have Krissy be conservative about these things than not, and then have us in a financial world of crap somewhere down the line.

When we get below this cutoff line, we naturally do an accounting of income sources, i.e., who owes us money and when we can expect it. And it’s here that we discover why, for a writer, things often get dicey. Because as it happens, I have a lot of money coming in — enough to get the savings back up to Krissy’s comfort zone and then some — but when it’s coming in is another matter entirely.

Here’s what I’m currently owed:

* 1st advance payment on The High Castle (for signing the contract)
* 3rd advance payment on The Last Colony (for publication)
* Royalties for Old Man’s War and The Ghost Brigades (the royalties on The Androids Dream are likely to be held as a reserve against returns, even though TAD shipped completely earned out)
* Royalties for The Rough Guide to the Universe
* Royalties for Coffee Shop
* Royalties for The Sagan Diary
* Payment for article on Ultimate Fighting Championship
* Payment for article on Annie Oakley

Add it all up, and it comes to… well, a lot. Good for us.

But it’s not here, which is the thing. Now, none of this is in arrears – in all cases the publishers in question are moving the money toward me in a customary and non-evasive fashion, which is nice — and all of this should be paid out in the next few months. I just don’t know precisely when in the next few months, however. Which means that none of this money can be used for the purposes of practical financial planning. For practical financial planning, you work with the money you have, not the money you expect to have.

And this is why I am happy that a) Krissy works for a company that pays her on a regular and predictable basis and b) I do By the Way and Ficlets for America Online, because AOL also pays me on a regular and predictable basis. Over the next few months, the amount Krissy and I will get from these regular and predictable sources is likely to be less than what I’ll get from the various publishers, when they finally disgorge what they owe me from the bowels of their payment departments. But it’s income we can count on, and which we can use to pay bills, groceries and mortgages, and which allows us not to have to panic while we wait for these various publishers to get their checks in the mail. The stability we have because of these day job incomes is worth an ineffable amount, when it comes to our peace of mind when the bills are due.

And this is why I always tell writers to be wary of ditching the “day job” — i.e., a source of regular income — unless they have something in place to keep the money coming in on a regular basis. A spouse with a good regular job can be key (it is in our case), but even then some amount of regular income from the writer him or herself in addition to a regular spousal income can make a real difference (also, it helps to have savings. But that’s for another time).

I’m happy to be doing well as a writer right now — it beats the alternative. But even doing as well as I am, I’m not at a place where I can say that a regular source of income doesn’t still matter for us and how we live. It’s something to keep in mind as you figure out your own writing path.

42 thoughts on “Why It’s Good to Have a Day Job

  1. I’m keepin’ my day-job (even though it’s actually a day and night job now). Plus my first (Council, $200 a month regular payments) and second (freelance design, about $100 a month, irregular, and I’m not pushing it, just former clients I do piece work for and give them a very low price, ’cause I like them) jobs. The writing is to hopefully replace some of that, to add to the savings, and be the “retirement job.”

  2. Actually, the quarterly tax estimate payments are like the tax withheld from “day job” income. It’s just simpler for you and them to do it quarterly rather than to withhold state and federal taxes from every individual advance and royalty check.

  3. Even though I’m nothing more than the occasional recreational writer, I really appreciate your openness about financial issues. Should one day I take a class or two and delve into writing a bit more seriously, I at least have an inkling on what to expect. You don’t often find free-lancers being so open with money, so, keep it up!

  4. I was going to ask if The Sagan Diary earned over your generous $5K donation to the John M Ford book endowment. Since you list that as an “expected” I assume it did. Good, I know I have my copy all ready to read the second I get done with Ghost Brigade (which doesn’t come out in paperback for 2 more whole weeks ARGH)

  5. I work in a library, and am an avid reader. As such, people who don’t read like to suggest I should write a book. Other than the obvious reason for not doing it (the book would suck, or be boring, or worse, both) I wouldn’t be able to live with the uncertainty of payment that you put up with. Live with. You know what I mean.

    I’m with Krissy on this. I manage the money in my house, and although I don’t use the word “allowance” that is basically what my husband gets. Otherwise, we’d have great toys, and no money in savings. And since he just got laid off, he is even happier than usual not to be in charge of the household money. And I am terribly grateful he doesn’t fight me about how I manage the household! It means I am not up nights right now worrying about getting the bills paid :)

  6. when one is self-employed the government makes you pay out every three months, because you can’t be trusted to make a lump sum payment, apparently

    You know, meaning this in a general-public sort of way, I think this is probably a pretty reasonable assumption for the goverment to make. It seems like most people tend to think of their dynamic finances in terms of the immediate. And, I’d be willing to bet that the quarterly payment requirement drastically cuts down on the number of self-employed people who shrug their shoulders at the IRS and say, “I can’t pay you what I don’t have any more/yet”.

  7. This is, like you said, one of the dicey things about being a writer for a living. Another concern that is easy to forget about sometimes is health insurance. (Another reason to have a spouse with a real job.) Do you, by any chance, belong to a writers’ union? Why or why not?

  8. Did you ever hear the old definition of a freelance writer as “a man with a typewriter and a working wife”?

    My wife’s an engineer. Good choice, if I do say so myself.

  9. The other thing about quitting you day job is health insurance and drug benefits. I am retired and make a great living so I can afford it but it is shocking the way retail customers are hosed. We recently lost a drug benefit and I had to pay retail. For a one month supply of anti-cholesterol drugs, my wife’s migraine medication and a single course of cold sore medication we went from a $30 copay, to $450. You could have floored me, I expected to pay around $200, but $450 was outrageous. The game is fixed. Pricing generics lowered the amount slightly. Online Canadian pharmacies dropped the price 40-60%.

    The discounts that insurance companies pay must be enormous. The retail drug cost represents more than 70% of my previous monthly cobra insurance payment (which is 110% of the normal payment), and the Canadian online pharmacies are making a profit as well.

    I fully appreciate the costs involved with bringing a pharmaceutical product to market in the US given the biological, regulatory, and legal hurdles the designers face. But really….!!! How much of this cost pay for the TV commercials, aimed at patients who have no basis to make an informed opinion on what medication they should be taking. I remember at time when marketing prescription drugs, to the general public illegal. Every time I see an irritable bowel or herpes commercial I pine for those times. I haven’t researched the proportion of the population on antistatins or those who have migraines, but they are significant. There is money being made hand over fist, and those less fortunate then me are spending money they cannot afford. Healthcare reform it’s the new black.

  10. “I wouldn’t be able to live with the uncertainty of payment that you put up with.”

    I’d never regard fiction writing as a full time job. I squeeze it in amongst my regular income-earning efforts, although that leaves me with no life to speak of.

    It’s a choice I’m happy with.

  11. I’m still waiting to hear about my taxes – but I found myself making the same list you did. What money can I somehow get to cushion the blow? What money is coming? When? What would make it come faster?

    There is no worse time of the year for the self-employed writer than tax time.

  12. The roles are reversed in my house, so I can fully understand Krissy’s “savings cutoff line”. Good gal you have there.

    It’s funny, whenever I let the money trickle down below that magic cutoff line line – some sort or major appliance will implode, or one of our cars will suddenly have a conniption fit. Murphy’s Law I guess.

    FWIW, I think 2007 will be a rocking good year for you John.

  13. Seems like a viscious cycle, because when you get all that money that is due to you, come next tax season, wont that be taken as well too. Seems like a never ending cycle. I used to have a sales job and I got taxed 42% out of every commission check I got, luckaly I also made salary but when you work and live in NYC both the state and federal government would rape me a new one. So despite the fact that I was making better money than most people I knew, after student loans, rent and food I would come close to having a negative balance every month. But such is life.

  14. “For practical financial planning, you work with the money you have, not the money you expect to have.”

    Seems like Krissy understands more than certain entire departments of overpaid executives and accountants at certain defunct mega energy conglomerates that we all know of.

  15. Hey, at least 2% of your income isn’t going to Kwame Kilpatrick, the “Hip Hop” mayor of Detroit.

    When I think that I help to pay for his high school football team members’ jobs as his entourage, and his girlfriends’ (past and present) city jobs, it brings my blood to a boil.

    Thinking of Ohio and taxes, what ever happened to the “Freemen” movement or whatever- the middle aged adolescents who maintained that no one had the right to tax Americans. The made their own license plates, but drove on public roads, etc. I remember one of them died in a shoot out with a deputy a few years back, but haven’t heard anything since.

  16. Oh dear LORD, am I there with you right now. Right up there with the non-trivial “you still owe us this” plus the non-trivial (at this point) first installment for 2007.

    And I made that other list, too. The on-signing advances from a bunch of foreign contracts which should be coming in – whenever – will help, but I would so like them to come in sooner rather than later and some of them have, well, shall we say more than six months have elapsed since I SIGNED the fricking contracts, and if I can sign them I don’t see why they can’t organise the on-signing payment to actually be, you know, ON SIGNING. Growl. (My record for that, by the way, is an on-signing payment which took a FULL YEAR to get to me after I signed the contract in question…)

    And here I am, sitting happily scribbling book 3 of the YA trilogy, planning projects for next year, fretting that my “cushion” is lower than I might like it but knowing, deep in my bones knowing, that I would want no other life than this.

  17. I’m fairly new to the book-publishing business (that is, my book hasn’t been published yet), and am hearing about quarterly taxes and wondering when that first check will come in from the publishers and how much of it is actually mine…

    Which is to say that I appreciate your openness about financial stuff, as I’ve been learning a lot from it.

    Also, my husband is reading Old Man’s War and really enjoying it.

  18. “when one is self-employed the government makes you pay out every three months, because you can’t be trusted to make a lump sum payment, apparently”

    I believe this is not because they don’t trust you, but because everyone is expected to pay as they go. The gov’t is running on the taxes being paid throughout the year. April 15th isn’t the time to pay your taxes. It’s the time to reconcile your account. If you were allowed to pay it all at the end, it would be like an interest free loan from the gov’t.

  19. 1. Given the press run of 500 copies of Coffeeshop may we presume that the royalties will be barely enough to cover youir next visit thereto?

    2. Ineffable = indescribable. When you say that something is indescribable haven’t you just described it?

    Nattering on we go

  20. Once you have a good agent and a good editor, the next step is to have a good CPA and a good attorney.

    This is not the time nor place to tell legal horror stories (which is one of the things that SFWA members tell each other late in the night after too many drinks).

    But the Taxman is always a common enemy.

    I politely pay the quarterly taxes — every self-employed law-abiding American knows how weird that feels.

    When the Feds or the rabid California Franchise Tax Board insists (always wrongly) that my wife or I owe some bizarre made-up number of dollars, I always send them a check IMMEDIATELY for that exact amount, with my CPA watching, and photocopies of the check archived.

    Usually, they cash the check, and then proceed to garnish my wife’s paycheck, or start the Lien on on our home. No phonecall nor letter can ever get them to admit that they have the money, and can stop taking pounds of flesh.

    Then I work long and hard with my CPA to prepare and file an Amended Return to try to get back my own money that the gummint’s stolen twice or thrice over.

    Sometimes, years later, they actually admit in writing that they owe me a refund, but that the Statute of Limitations has run, and they don’t have to give it back to me.

    So I pre-pay $1,500.00 to an expert Tax Negotiator to act as an agent in between me and my wife and my CPA and the bizarro mutant android tax-beings.

    Dave Brin can say it as often as he wants that paying taxes is good, because it is the price of civilization. I allow him to say so, because he is a more successful writer than me, with a larger family, more awards, and a bigger home on a bigger piece of California Real Estate before the bubble bursts. I remember my parents agonizing over the bills and tax forms, with the checkbook out. I didn’t get it, as child. I assumed that a bill comes, you write a check, end of story. I didn’t know that many people have to decide: buy food or pay rent? Buy medicine or pay electricity? Pay taxes or flee the country? Hard to write your way out of these situations.

    Shiela Finch has a heck of an Audit story to tell, after the sun’s set and the moon rises, and people start in on goosebump-raising tales.

    John Porter’s Harvard Business School Model of Competition lists all 5, to which you must strategically and tactically respond, or fail:

    (1) Other entities producing goods or services for your target market [this is the one most people think of; for writers, this means other writers, and numerous distractions];

    (2) Your suppliers [writers buy insurance, computers, paper, pay to fly to and attend cons, buy books, and so forth];

    (3) Your buyers [this is the basis of Pricing Theory];

    (4) The Government [regulation, taxation];

    (5) Technological changes which change the Fitness Landscape.

    I say again: if you are not following a written business plan to succeed in the face of these forms of competition, then you are following an unwritten plan for failure.

  21. Right there with you, man. Right there with you. I’m not going to be able to sit down for a while after the creepy white-haired uncle’s visit last week.

    *ouchie*

  22. Bennies. The main reason for keeping the day job, above and beyond the steady income. The health insurance. The dental insurance. And any other perks that come along with your position.

    We also pay quarterly tax but it’s not on my writing income (yet). Investment stuff.

    As a former bookkeeper, I had to keep the books up to date and keep paying this stuff for the bosses. It gives you a different perspective when you realize that the Feds expect this stuff on a monthly/weekly basis.

  23. A couple things:

    – I’m not sure when the practice of demanding quarterly estimated tax payments started, but payroll deductions, the salaried-employee counterpart, were instituted by FDR to pay for WWII without bankrupting the country. Apparently that crazy Roosevelt never tumbled to the idea of passing the bill along to your children and grandchildren.

    – I’m glad David Brin feels it’s important to pay taxes; I do, too. But it was Oliver Wendell Holmes who first said, “I like to pay taxes. With them I buy civilization.”

  24. A couple things:

    – I’m not sure when the practice of demanding quarterly estimated tax payments started, but payroll deductions, the salaried-employee counterpart, were instituted by FDR to pay for WWII without bankrupting the country. Apparently that crazy Roosevelt never tumbled to the idea of passing the bill along to your children and grandchildren.

    – I’m glad David Brin feels it’s important to pay taxes; I do, too. But it was Oliver Wendell Holmes who first said, “I like to pay taxes. With them I buy civilization.”

  25. You pay in quarterly installments because if you pay in a lump sum at the end, it denies the government the interest it would otherwise earn in the meantime. The interest on withholding is a money maker for the government and if you don’t pay as you go you are a freeloader in comparison to those of us who do pay as we go.

    Whether this is fair or just I will leave to the whiners.

  26. I have observed among friends and such that having a steady day job doesn’t necessarily guarantee you a steady paycheck, good healthcare, retirement funds, etc. One layoff can make all that go away, and you may not see it coming.

    That made me feel better about being a full time writer. In that respect, my job isn’t any more uncertain than anyone elses.

    I don’t have a spouse with a job. I’m doing this all on my own. On the plus side: I put money away for my own retirement. I have health care–that I picked and I control. I’ve learned that I need to keep a much bigger savings buffer than is usually suggested, and I need to not spend those checks that John talked about before I actually have them.

    Yes, this week with that big payment was a little scary. But I’m also just starting out and learning a lot.

    It can be done. You just have to pay attention.

  27. John,

    I’m in the exact same situation, except both my wife and I are self employed. Just paid a buttload of taxes, in which I would have described our situation of our handling of it as identical to yours – we have a threshold, first quarterly was about equal to what we owed, etc etc. I’m probably more like Krissy than you – my wife was shocked when she married me to learn that I demand a minimum 5k cushion in the checking account (partially because I don’t balance my checkbook).

    Anyway, my question for you, because I’m wondering if I pay an *unusual* amount of taxes, including my local business taxes (which are quite a lot) is : what percentage of your *gross* (not your AGI) do you pay in taxes, fed, SE, state, local all together. Maybe including even dividends, etc. Are you incorportated, btw? I am considering that this year because of the brutal SE taxes but am unsure if it pencils out.

    I think I ended up paying about 25-26% total. Obviously our states and localities will have somewhat different tax burdens.

  28. Bob Wall:

    That’s about the level of our tax burden; ours might be slightly higher overall, but if so not much more. I would be surprised if we paid out more than 27 – 28% total. That’s in line with what we’ve been paying over the years; some years we pay more, some less, because our income fluctuates by as much as 40% from year to year.

  29. Over on By the Way, you mention that in fact you use an accountant.

    Why?

    I just finished doing ours, enjoyed the process as always – multiple states, qualified versus non-qualified dividends, deciding on the optimal filing type, AMT and all – and am reasonably sure that we don’t miss any $$ we would save via an accountant – so I was just curious. Yeah, I get that most folk don’t actually like running the numbers, but I never saw the motivation to jump from ‘this is annoying’ to ‘this is worth paying someone significant $$ to avoid doing.’

    OK, I’m rambling now.

  30. We have an accountant because our taxes are fairly complicated and I don’t want to bother, and this way if we’re ever audited, she has to deal with it.

  31. There is a fair amount of biographical material on Virginia Heinlein out there, including some pretty specific stuff about how she helped manage the business part of Robert Heinlein’s writing career. Is it just coincidence that Krissy seems to do the same thing for you? Have either you or Krissy ever read much about Ginny?

  32. Ewan:

    “I get that most folk don’t actually like running the numbers, but I never saw the motivation to jump from ‘this is annoying’ to ‘this is worth paying someone significant $$ to avoid doing.’ ”

    I use an accountant too. His fees pay for themselves; last year I got a tax refund which more or less covered what I paid the accountant to do those taxes. And *I don’t have to think about it*. I was never happier than when I could quit doing maths at any sort of school – numbers and I don’t get on well, that is why I am a word-nerd. Sure, I learned my multiplication tables at school and I can add a column of figures – but what I am NOT qualified as, and don’t wish to start, is the legalese of the taxes, what I can deduct, what I can’t, what qualifies, how much of my income winds up being taxable after deductions, how my putting money away into a retirement fund and how much I put there affects how much tax I pay in any given year. THAT’s what I pay my accountant for. That’s his business, his experience, his field of expertise – and what HE knows, I don’t have to.

  33. Ewan –

    Do you have a schedule C, do you depreciate your house, and have an office in the home, and business assets? While not *complicated* it is complex. W-2 people probably don’t need to use an accountant. The rest of us probably do.

  34. Alma –

    – thanks for the additional answer :). I think part of the backstory to my question was the bias that SF folks might be ‘like me’ in enjoying the minutiae of tax arcana, even though not doing it for a living.

    Bob –

    – I’m going to err on the side of caution in terms of how much detail I put into a public environment; but, yeah. Although no schedule J. (I wouldn’t have asked the question, probably, if my wild-ass-guess had not been that the Scalzi tax situation was unlikely to be significantly more complex than my own. Which is not to way that said WAG may not be wrong, even wildly wrong.) I think, on further reflection, this may be coming from the part of my brain that plays bridge and complex wargames: the bit that enjoys ‘here’s a 200-page set of rules, now see how well you can play this game.’ Which is not the same gyrus as the SF affinity, in all likelihood.

  35. So are you trained, like me, to perk up at the sound of the mail truck and immediately run out to see if any checks came?

    The waiting makes me crazy. I dream of regular paychecks!

  36. As the person who handles the finances in our house and also gets worried when our savings drops below an arbitray line that I have in my head as being unacceptable, allow me to raise my coffee to Krissy and say “Preach on sister!”

    ;)

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