Advances: Buy, Sell, or Hold?
What should you do with an advance, if you get one? For purely indie writers, or those who work with small presses that don’t offer advances, we dream fond dreams akin to “if I won the lottery, I would . . .”
I have gotten one advance, that for a non-fiction work. It was to pay for necessary research, and I used it for just that, after deducting 30% for Uncle Sam (social security and Medicare taxes – 22.5%, plus extra just in case.) The hefty advance countered the very, very low royalties, which makes that a bit of a backward contract compared to fiction. However, the tax problem remains constant, as does the question of “Ooh, money, what now?”
So, what should you do with the advance money, once the check clears your bank and you see your account amount inflate? I suspect, as low as most advances are today, the average John Q Writerson will enjoy a nice dinner out, pay some bills, and go on. People fully intend to fulfill the contract, they needed the money, and spending it on necessities and a luxury or two are what one does with an advance.
However, depending on circumstances, it might be safer to set the money aside and not touch it until the contract is completed and the manuscript is delivered and accepted. Far easier said than done, especially when bills start to mount up, or Jill Q Writer hears shrieks and a young voice calling, “Mom, Mom! Jack fell out of the tree and his leg’s pointed backwards!”
If I had any doubts about the publisher, or about my ability to finish on time (known major life event pending), I’d probably bank the money and not touch it. Especially in today’s political climate, as fickle as social media can be and as quick to drop writers as many publishers have become, being able to hand back the money and keep my sanity and scruples intact might well be worth the financial pain.
Another reason not to touch an advance would be: taxes. I’ve felt the pain of a retroactive tax increase, one that caused me to have to borrow almost $10K in order to pay the Feds and state. Yes, I’d done what I was supposed to do, but a retroactive leap in the capital gains tax, combined with another retroactive surprise, bit me in the tuckus. I’ve been a touch paranoid since then. If I had any question about what my tax situation would be, I’d put the money away and wait until I knew what was coming. (Note: Some states tax money that you earn there, even if you live and work most of the time out of state. [CA] If you are paid by a publisher incorporated in one of those places, be prepared for a surprise. Consult your tax advisor/ CPA.)
Life happens. None of us plan on getting conjunctivitis that keeps you from being able to read or type for a month. No one plans on having a car wreck, or a reaction to medication, or a death in the family, a fire that levels the entire town, or anything else that keeps them from writing. If you get an advance, you might keep those things in mind, just in case. Better to have the money to pay back the advance if you can’t keep the contract, then to be scrambling to raise the funds and avoid a law suit.