How to manage your finances as a freelancer 

  • Freelancers need to be especially proactive with their finances, says financial advisor Winnie Sun.
  • The first step, Sun says, is to consider expenses and put a budget in place.
  • And if you don't have a 401(k), there are plenty of alternatives that can help you save for retirement.

Freelancers need to be especially proactive with their finances, financial advisor Winnie Sun says.

The first step? Understand your cash flow, said Sun, founder of Sun Group Wealth Partners.

Consider your expenses: Is what you're doing profitable? Are you sitting in a home office? Are you bringing on employees? "The budget is the No. 1 thing to start with," Sun said, adding that it is especially important to make sure you're preparing for your future along with your business.

"When you're freelancing, you may not have a 401(k) at work," Sun said. "But there are some great options that can give you a similar way to save for retirement."

A so-called SEP individual retirement account is a good route for self-employed people to save, and they should also be storing away money in a Roth or traditional individual retirement account, she said. People should make their payments to their retirement accounts automatic so they're more likely to follow through with their goals, she added.

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Try not to postpone saving for old age, even while you're working at getting your business off the ground. "I have a lot of freelancing clients that look back and wish they had started saving for themselves in the beginning," she said. If they had put away "even $100 a month, that would have made a big difference," she said.

Freelancers should always have a plan B, should their work dry up. "I recommend at the minimum to have six months of living expenses as your cushion or buffer," Sun said.

For some full-time workers, the cushion might be freelance work. "It kind of broadens your scope and gives you other opportunities to bring in additional income," she said.

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