Hey everyone! Welcome back to the next instalment in my blog series Mastering Money for Writers. As discussed in my original post, we’ve been focussing on the topic of taxes (something that many of my writer friends have asked me about).
So today, I’ll be discussing what writers could claim as a tax deduction. Let me start with a few disclaimers. What I’ll be sharing below are just ideas and possibilities. At the end of the day, you still need to confirm with your accountant what will hold up in the eyes of the taxman.
The key principle I hope to get across is a huge mindset shift I experienced in my own life—so much could actually be claimed! So I hope by the end of this post, you’ll find your mind thinking more creatively about this topic.
Let’s now begin discussing one category at a time:
Hey everyone! Welcome back to the next instalment in my blog series Mastering Money for Writers. As discussed in my previous post, we’ll be focussing on the topic of taxes for the next couple of months (something that many of my writer friends have asked me about, since it has been tax time in Australia).
So today, I’ll be discussing tax record-keeping tips.
The key principle I’ve learnt about taxes is, the more you can prove to the government that you have legitimate expenses in your “writing business” (the more examples you can show), the less tax you will pay. Because in fairness, you should only be taxed on your net profit (i.e. income minus expenses), not on your revenue (income before expenses are accounted for).
Dear fellow writers. It’s great to have you back for another topic in my blog series Mastering Money for Writers. The previous months, I discussed the dreaded B-word (Budgeting). The focus of the next few posts will be the dreaded T-word—Taxes.
I wanted to begin by sharing something I’ve realised since frequenting the ATO (Australian Taxation Office) website. This realisation has sparked a shift in my mindset and consequently my approach when taxes are concerned.
Guess what? You’ve made it to the last post in this topic!
If you landed on this page and don’t know much about this blog series “Mastering Money for Writers”, I recommend starting from the Introduction or at least Part 1 before continuing.
Because by now you should know the following:
Your Lowest Monthly Income
Your Total Critical Monthly Expenses
Your Total Discretionary Monthly Expenses
The meaning of Cashflow & why Pay Yourself a Salary
Why you should start filling your Water Bucket
Hopefully some months, you’re still going to have money left over. You may not believe me now but there is something about being in the mindset that you’re in control—life rewards you by giving you more abundance. It’s almost as if it knows you’ve now got the tools to handle more wealth. That you’ll have a greater respect for the money coming your way, no longer consuming it without consciousness that more often than not ends up being wasteful.
Let’s now discuss these final steps.
Chapter 6: Pay Your Debts, Build Your Dream Fund, and/or Invest the rest
What you do with the surplus money you will have depends on your personal circumstances.
Pay Your Debts
If you have debts (credit card, personal & car loans, money owed to others, etc), it’s logical to attack this before you even think about things like investing. Because the nature of interest-ridden debts especially is, every single day, your unpaid debt is growing, which in effect is making you poorer and poorer. Banks and lenders use language to make it feel like it’s such a small amount and thus not a big deal as long as you make your minimum payments. But when you look at and understand the Maths, you might find yourself feeling sick… I’ll give you an example:
Congratulations on making it this far! We are on the last leg now.
If you landed on this page and don’t know much about this blog series “Mastering Money for Writers”, I recommend starting from the Introduction or at least Part 1 before continuing.
Because by now you should know the following:
Your Lowest Monthly Income
Your Total Critical Monthly Expenses
Your Total Discretionary Monthly Expenses
The meaning of Cashflow & why Pay Yourself a Salary
Let’s discuss what to do with some of the money that is (hopefully) left over.
Chapter 5: Start filling your Water Bucket
Like I’ve mentioned in past posts, the language used in money can impact how you feel and thus the actions you take. This category of money is also described by many names, the most common being an “Emergency Fund”. In one of my most favourite personal finance books ever, “The Barefoot Investor”, Scott Pape calls this pool of money the “Mojo Account”.
I’ve chosen the name “Water Bucket” because, the purpose of this fund is to put out the unexpected fires that are unfortunately just part of life. So this is money to cover only emergencies like (God forbid) a car accident, household and car repairs, medical expenses and other emergency bills.
Welcome back! If you landed on this page and don’t know much about this blog series “Mastering Money for Writers”, I recommend starting from the Introduction or at least Part 1 before continuing.
Because by now you should have the following figures:
Your Lowest Monthly Income
Your Total Critical Monthly Expenses
Your Total Discretionary Monthly Expenses
Now get your spreadsheet ready (if you’re a Plotter) or a pen and paper (if you’re a Pantser) so we can analyse what we’ve got and learn some new terminology.
Chapter 4: Understanding cashflow & paying yourself a salary
First, put the figures we’ve worked out into your spreadsheet or as a list on your sheet of paper. Here’s an example:
Your Lowest Monthly Income
$3000
Your Total Critical Monthly Expenses
$2000
Your Total Discretionary Monthly Expenses
$800
Cashflow = Your Lowest Monthly Income – Your Total Critical Monthly Expenses – Your Total Discretionary Monthly Expenses
+$200
In Business, the term Cashflow refers to “the net amount of cash and cash-equivalents being transferred into and out of a business.” (Investopedia)
What does this really mean and why is it important?
Hi again! If you landed on this page and don’t know much about this blog series “Mastering Money for Writers”, I recommend starting from the Introduction or at least Part 1 before continuing.
Because by now you should have the following figures:
Your Lowest Monthly Income
The amount you need to cover your Critical Monthly Expenses
But let’s get into this next step!
Chapter 3: Work out your discretionary monthly expenses
This section should be easy, yet at the same time eye-opening, maybe disconcerting. Because we will finally understand where all our money is going, see expenses we perhaps didn’t even realise existed or forgot about. So attack this in two stages.
Just understand your reality and list the additional monthly expenses you incur such as:
Welcome back for another lesson in Mastering Money for Writers. If you landed on this page and don’t know much about this blog series, I recommend read the introduction and part 1 before continuing.
Otherwise, let’s dive straight in!
Chapter 2: Work out your critical monthly expenses
If you do a search on the internet, this category of expenses is given many names, some quite creative. For example, Dave Ramsey refers to these essential expenses as the “Four Walls”: food, utilities, shelter and transportation.
It’s also been known as the “noodle budget”, describing the times we’ve all been through when we’ve had to survive on instant noodles so we can still cover those critical expenses until our next payday.
As writers, we know words are a powerful thing. A single word can halt a nation, stir a rebellion, move someone to tears, shift a person from a state of hopelessness into enlightenment.
So let’s be honest for a moment. When you hear this word, “Budget”, what are your immediate feelings and thoughts? Is it anxiety because how can you budget when your income as a writer is perhaps small and unpredictable? Is it scepticism because you’ve tried budgeting before and it just didn’t work for you? Is it tiredness, overwhelm, the thought of the work to put this into motion? Is it rebellion when you just don’t like the idea of the restrictiveness associated with it?
What if I were to tell you in the world of Business, completely different emotions are evoked by this word?
Budgeting enables movement and growth. Budgeting is your heartbeat, your oxygen. Budgeting is clarity and power.
It’s been in the back of my mind, an inkling, this idea about starting a blog series for writers to help them master money. I’ve procrastinated primarily because, I have a lot on my plate right now—two jobs, my own writing goals, a few personal and business ventures… But even before the devastating impact of COVID19, I remember hearing about the financial struggle of writer friends of mine, describing their secret distress from payday to payday, the anxiety with every “unexpected” bill—what I personally experienced about a decade ago after my family lost our home to a friend who turned out to be a professional conman. Reflecting on the stress, the shame, the depression I’d felt in my times of hardship, but especially the fact that I can now look back from a place of empowerment and financial confidence, I’m reminded that it’s a responsibility to share the knowledge I’ve gained that’s turned my circumstances around Alhamdulillah.
