Five Things Every Writer Should Know About Money
The financial sky is falling, and so I thought I'd write about money and writers, and perhaps offer advice on what to do if you are a lowly writer, with just a few bucks to invest, or even a bestselling (or otherwise wealthy) author and you are watching your nestegg crack and ooze onto the Formica top, along with your dreams. I was chairman of the Finance committee of a writers' center for many years and briefly an economist before I turned fiction writer, and I thought I knew what I was doing, until the past couple of weeks of this financial meltdown. We could blame so many on Wall Street and in Washington, but the point is to survive.
# 1. Make sure you have enough cash to survive this economic downturn.
I have a money market fund at Vanguard, and it surprises me to learn how many writer-friends don't have this basic account for their short-term spending. 'Enough cash,' for me means at least six months for monthly bills and the like, and a money market fund, although not FDIC-insured, is usually a safe place to keep your spending money, with check-writing privileges, while it pays dividends.
# 2. Read Manias, Panics, and Crashes: A History of Financial Crises, by Charles P. Kindleberger and Robert Aliber, a classic of investment literature.
You will quickly understand how the expansion of credit has been behind almost every major financial crisis, including the one we are in now, and how each crisis has played out over time with different, sometimes remarkably stupid, policy responses. The world never ends amid the turmoil, but alas, plenty of pain does follow the bursting of that proverbial bubble.
# 3. Invest, young writer.
If you are not crying over all the paper losses in your portfolio, if you are just starting out as an investor, as a writer, and if you have a strong stomach, invest. Market downturns are the best time to start mutual funds, the best time to start investing, and the worst time to even listen to anybody telling you to invest in the stock market. Be a contrarian, and have the best historic shot of making serious money, but also be careful. No one knows where the market bottom is, until ex post facto, so invest by dollar-cost averaging. That is, set aside investment money that you will not touch for at least five years, and drip it into an S&P 500 index fund over a 12- or 24-month period.
# 4. Never sign a book contract which pays you, the writer, your percentages from 'net price.'
Get your percentages from 'list price.' Net price is the discount (usually 40 percent) to the list price that a book is sold to the bookseller by the publisher. Do you want 15 percent of $12.00, or 15 percent of $20.00 for each book you sell? You would think everybody would know this, but I have read too many contracts that should otherwise be dumped into the horror bin.
# 5. Take heart, you are a writer, and you shouldn't really care about money, because if you did you would never have become this artiste.
Right? Right. Be a bottom-feeder and be proud of it: start a program to invest regularly in the stock market amid the chaos, and don't ever worry for more than a few minutes each day about how we are fast becoming a country that doesn't read.
--- Sergio Troncoso
--->For the archive of Madam Mayo guest-blog posts, click here.
UPDATE: Sergio Troncoso now has a blog on writing and money: Chico Lingo.