Though self-publishing suggests DIY (do it yourself) most of us are not able to do all of the things required to create a book. That’s ok. In most cases you won’t be able to do it all, and for some things, like editing, you shouldn’t. You’ll probably have to contract out for things like cover art, editing, (in some cases) layout, etc...
All money you spend toward the production of your book is a gamble. Remember this. There is no guarantee your book will sell no matter how much money you throw into it. I’m not trying to suggest that you won’t make any money on your book, but you do need to be very realistic in your goals and keep a very level head where costs are concerned. You should never go into these separate contract works with a blank check mentality. Spending $1,000 on a book cover might not be the smartest decision even if the artwork is spectacular. That $1,000 will have to be made up in sales (along with all of your other production costs) before your book can begin to make you money. All cost need to be weighed out carefully. You should always be on the lookout for "the best bang for your buck."
Before you take any steps in the production of your book, sit down and create a budget. Set a limit on how much money you're willing to invest in your book and use that limit to help you budget out each of the cost involved in production and marketing. Make sure you have marketing money in your budget. Often time’s authors forget to factor the post production money into their total costs. There are plenty of ways to bleed cash when it comes to marketing. Setting a spending limit beforehand will help you to avoid sinking more money than you wanted into the cost of the book.
When setting your budget you need to be realistic about the book's cost to publish and sales goals. It is going to cost you money. Don't think that you can get away too cheaply because you are afraid of the gamble, and on the other hand, don't overspend expecting to make millions. This budgeted number is not only the limit to your spending, but it will also become your break-even point.
The break-even point on any published work is the total of all monies spent getting to that point plus any additional marketing costs. Only after sales have netted you enough money to reached that break-even point do the books actually start making money.
Take a good look at the genre you write and the market for your books. Look at how other books are selling. Talk with other indie authors and get a clear picture of how long it took them to establish regular sales and reach their break-even point.
I've found that other indie authors are very willing to discuss things like cost and sales. You may be thinking that we're all competitors, but really that's not the case. Sure, we're all after the same goals: To sell books. But we're also on the same team, we're all striving to take away the stigma of poorly produced self-published work. It's because of this that you'll find other indies more than willing to offer advice and tips to help you succeed. I've said it before and I'll say it again, Kindle Boards is a great resource for information. Check it out!
So, do your homework and set out a realistic budget before diving into the self-publishing pool.