(I refuse to say "if you can do anything else but write to make a living, do it," because I'm sitting here making a living writing, and I can't say it's a bad life. It's hard, yes. But if it's your dream, who am I to tell you not to do it?)
It's actually pretty easy to figure out how much writers make:
The average sellthrough of a mass market paperback is 50%. So you can calculate about how much an author makes based on the print run.
A midlist author has mass market print runs anywhere from 20,000 to 100,000 per book.
A lead or top author can have mm print runs of 100,000 up to a million. This is where the bigger money is made, this is New York Times, book tours, and all the other hoop-la.
You as an author do not choose where you start--the publisher does.
(You do have some control over this--as in, if the publisher offers you a low advance and a midlist slot, you can always say no. If you get no better offers, then you'll be starting as a midlist.)
Trade and hardback print runs are smaller, anywhere from 10,000 in the midlist to 70K for leads. Of course trades and hardbacks are more expensive, so you make more per copy sold, but that's offset by the lower print run. Sellthrough is usually higher, about 70% (at least, that's what the publisher wants to see.)
In trades you make about $1.00 per book sold; hardback $2-$3 per book sold. Mass market (based on 6.99 and 7.99 retail price and 6%-8% royalty) you make about 40-50 cents per copy.
You as an author do not choose whether your book starts as hardback, trade, or mass market. (Your agent can push for what you want, but again, your power is in declining the offer.)
In mass market: A midlist author will make anywhere from $5000 to $40,000 per book (note that's per book, not per year).
A $5000 book is a beginning book that sold about 10,000 mass market copies (based on 8% royalty with the book being $6.99); I'm assuming this author had a 20K print run and sold about half.
The $40,000 mass market book sold about 80,000 copies; and since my sample author is still midlist, I'm pretending her print run was 100K. Her sales probably put her on extended bestseller lists, which might incite the publisher to boost her to a lead position.
A lead author with a print run of 250,000 can make $125K or so for that one book.
A trade book with a print run of 20,000 that sells through 70% (which is 14,000 copies), generates about $14,000 for its author. If the author is lucky, the book's mass market rights might be sold, which could get her another chunk of change.
I don't have a lot of experience in hardback, so I'm not going to speculate on its income. When I do, I'll let you know!
Now let me insert the bad stuff:
If your first book makes $25,000, that doesn't mean you get a $25,000 check dropped in your lap. Even if your advance was $25,000, it will be dribbled to you in several pieces: a. when you sign the contract; b. when you turn in the book and it's accepted by the editor. That means after you do the revisions (if any) she asks for. Then she puts in the request for your payment to her acct. dept.
If you got a $5,000 advance on that book that earned you $25,000 in royalties, you have to wait for your royalty checks to collect the other $20K. You don't get a royalty check until at least six months after the book is published. And you turn in the book anywhere from nine to 18 months before the book is published. And then the publisher holds a "reserve against returns" for a year or so in case they get more returns than they expected. So it might take you three years to collect that entire $25,000.
Oh, and if you make $25,000 in royalties and your advance was $30,000 . . . you don't get any more money. You don't have to give back what you didn't make, but they might cut your next advance or simply "pass" on your next proposal.
All this means that the first few years as a writer will be lean, even if your book is a hit. But what happens after that is what I call a snowball effect. All these bits and chunks of money from signing contracts, turning in books, receiving royalties, signing another contract, selling secondary rights, etc. start to add up.
Also, because you make your money per book, the more books you write, the more money you make. (But always take a realistic view of how many books you can comfortably write a year--sacrificing quality for quantity will hurt you in the long run.)
There are also ways to supplement your writing income:
Secondary rights. If you own your secondary rights (foreign translation; audio; movie) to your published books, your agent can sell these to get you extra money. If you and the publisher are splitting these rights (usually 50/50), then the publisher will be looking to sell secondary rights. That's what they do at all those book fairs in London and Frankfurt and at Book Expo America. As of yesterday, my agent and publisher have sold rights to several of my books to publishers in Germany, Italy, Holland, and Russia. Bookclub rights (Doubleday) is another secondary rights sale that adds to your check.
Writing for more than one publisher. If you can keep to the schedule, consider writing books for more than one publisher. Many of my author friends do this--they might write for Avon and Harlequin; Kensington and Dorchester; Berkley and Pocket, etc.
Be careful--publishers don't want you publishing the same thing for their rivals, so you may be writing two different kinds of books, perhaps under different pseudonyms. This can be fun--I love trying out new genres, and writing for multiple publishers lets me do that. But check the option clause in any and every contract you get, and change it if necessary to let you continue to write for more than one publisher.
Writing for e-publishers. The beautiful thing about e-publishers is they send you checks every month. Depending on the publisher, they might not be big checks, but again, they can add up nicely. At Ellora's Cave, sales average 900 downloads per book in the first 30 days. You can sell more than that--keep in mind that 900 is an average.
At e-publishers, your royalty rate for e-books is 37%-40%. Very short books (12K) make about $1.00 royalty per book. Novel-length (60K and up) make about $2-$3 in royalties per book. Authors who manage to write multiple books for these publishers do well for themselves. Many of them are making that their day job while they try to break in to NY publishers--plus they're busy building a following. I don't write that many stories for e-publishes, but I make a secondary income from them to let me buy groceries while waiting for my NY publishers to send out royalty statements.
As you can see, writing is not the way to instant riches. It's a job in which you have to work your behind off to succeed.
You have to be careful, you have to be smart, you have to go in with blinders removed, you have to acknowledge that you might face disappointment, hurt, anger, and rejection.
It's a hard slog, but if you educate yourself and know what you're getting into, you might just make it.