Author: My budget and planning for the future
Max Gladstone is a fantasy author best known for the Craft Sequence. He shares how he manages his finances as a writer, including taxes and retirement savings.
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I'm Max Gladstone. I'm a novelist. I make about $48,000 a year. So my financial goals are to save roughly a third of take-home income and put that into stable, growing retirement assets. When I was a kid even, some of the money that I'd bring in from like working at a local pizza joint would go into a Roth IRA, and my parents had a very rigorous matching program that they'd talk with me about, that kind of stuff, right. So I had a sense that this was very important, and I was continuing to put whatever I could into it through college, and then while I was in China, I was running off of grant income that didn't actually allow me to invest in a Roth, but then when I got back into The States, I started trying to do it again. When you are self-employed, which I functionally am as a writer, there's no 401(k) program. You also don't have any W-2'd income. So it's tricky to take advantage of tax-deferred or tax exempt retirement accounts, so there are things that you can do. I have just not been savvy enough to do them yet, but you can have a self-employed 401(k), which will allow you to take a chunk of your self-employed income and put that in a tax-deferred situation, which is really, really great because as a self-employed person, you're not only getting hit with income taxes, you're getting hit with business taxes or self-employment taxes. When you're self-employed, your employer because they don't exist isn't taking a chunk out of your paycheck every paycheck to send off to the government. So the government asks you to complete quarterly estimated taxes of your income based on what you think you're going to make over the course of the year, and you're generally allowed to base that estimate on what you made last year. So at the beginning of the year, you take this form, fill it out with your estimates of your income, and you crunch a whole bunch of numbers, and it'll give you how much tax you're supposed to send to the government, which is generally a federal and a state government level, Q one, Q two, Q three, and Q four. Then you have to include that in your budgeting for the course of the year, so I generally assume that a third of whatever comes in is going to go out in tax form. This means that I try to keep as much of the income that I'm making untouched over the course of the year, the artistic income untouched over the course of the year for taxes and things like that, and then I can bank it all and do stuff with it over the course of the next year. My wife and I are very fortunate in that we can largely do our budgeting off of her income and then save a decent chunk of that, and then my income goes to contributions to savings and retirements and all of that kind of thing. So we have that stable base that we can work with. If you're not working off of that stable base, it's really important to be certain that you are withholding as much as you need to from the checks that are coming in the door. If you want to have the illusion of having a more regular pay structure, you can set up a number of systems that will approximate that. Some of them involve just having a separate account at a bank and then setting up some kind of automatic payment or automatic transfer from whatever savings account you have into your sort of checking account or the sort of usable income account. Then there are some that don't just involve budgeting software. So I've used budgeting software to basically amortize the amount of income that I have. I was really lucky in that my dad and his dad were always very interested in talking to me about money and interest and how it worked, and so I've always had a pretty strong ethic around trying to hold on to funds and try to get them into the market when possible and when there's a good time to do that. The biggest thing that I've had to learn as I've become a professional writer and have become more freelance has been all of the personal responsibility around running your own business, keeping track of your money, knowing where it can go and where it can't go and what you can do with it and what you can't, and sometimes also the fact that you need to spend a little bit of money to get yourself out there, to go to a convention or something like that, and how to balance the costs that a particular sort of promotion will give you versus the opportunities that they'll give you, and the really exciting thing and also scary thing about all of this is how much there always is to learn about your own business, about the financial world, even about what happens to your own money, and especially when you're working with another person when you have a partner who's in it with you for life, it's important to be able to talk very carefully and kindly and considerately through the complexities of dealing with money. It's a subject that a lot of people get a lot more emotional about than they need to. It's a subject in which a lot of people have deep seeded and unexamined convictions, and so it's important to be able to communicate with whoever you're working with around those issues.