The great news: There’s a wide array of financial information available to us these days. We can find it in everything from print media to Internet, television to seminars, and podcasts to live streams.

The not-so-great news: Financial literacy information rarely addresses the tricky topic of freelance finances.

The prevailing advice is usually geared toward people with regular 9-to-5 jobs who are on a very typical path to retirement. These are employed individuals who will sock away as much as they can in a company sponsored 401(k) or other retirement plan over 30-to-40 years, and will then get out of the work force as soon as possible to enjoy their retirement.

The problem with freelance finances . . .

For artists, this slant in financial information has always posed a problem. They have to first understand what the information actually means and then determine how it applies to the life they lead — one in which the feast-or-famine scenario is a constant reality and resources for building a diversified financial portfolio are often limited.

Additionally, artists and many freelancers are already doing what they love to do, so the prospect of retiring to do something else rarely factors into their thinking. While others are toiling away at jobs they can’t wait to leave, most freelancers are looking forward to continuing their growth in their respective disciplines.

Consultant budgeting his freelance finances

Recommended Reading: Conquer Freelance Taxes & Independent Contractor Tax Deductions

The benefits of taking control of your freelance finances and building a solid, well-diversified asset base will provide you with peace of mind and the ability to weather periods of time when income is scarce. Proactive management of your finances will also afford you the opportunity to live the life you wish to live.

But how do we work toward financial security when we live our lives outside the ‘norm,’ which most mainstream financial guidance is based on? Let’s look at a few ways that conventional financial advice can be re-imagined to better suit the needs of freelancers.

Make your own payroll deductions

A pervasive piece of financial advice is to automate your savings through payroll deductions. However, freelancers don’t usually have a regular payroll schedule. Their inconsistent flow of income makes it difficult for many of them to save and invest their money.

One way to adapt the payroll deduction strategy to the realm of freelance finances is to determine an investment amount that you can comfortably make each month while paying your regular bills. Choose an amount that won’t overburden you in light income months, so you are not tempted to abandon your efforts. This will allow you to establish an asset base that you can contribute even more to during high-income periods.

Determine ahead of time how much of your extra income you will save and invest in flush months to help you stay on track. For example, you may decide that in months where your extra income is more than $100 over your monthly expenses that you will put at least fifty percent toward your investments.

Consider sheltering other assets outside of retirement vehicles

Another common piece of financial advice for conventional employees is to shelter any income-producing assets — such as dividend paying stock, bonds, or mutual funds & ETFs that contain them — in retirement vehicles.

Part of the reasoning behind this is the assumption that while you are making a steady salary you won’t want to add investment income to your taxable income, as this may cause the investment income to be taxed at a higher rate.

By keeping these types of assets in retirement vehicles, their dividends or other income can be earned and reinvested without being taxed. At some time in the future, when you start to tap into these retirement vehicles, you presumably will no longer be working or will be working at a reduced pace — therefore the income withdrawn from them will be taxed at a lower level.

Freelancer on a scooter has managed his freelance finances effectively for slow months by keeping some of his investments cash-fluid.

But for freelancers with widely varying monthly income, having income-producing investments available outside of retirement vehicles may be beneficial.

• During months that you have sufficient income to cover your expenses you can have the dividends or other proceeds reinvested in additional shares of the asset.

• In months that your income is lower than expected you can instead use the investment income as supplemental income.

Most financial institutions now allow you to manage your accounts online, so the ability to easily change between having proceeds reinvested or paid out to you is quite simple. However, this strategy would not be as useful for retirement accounts as you may be assessed penalties for assets you remove from them prior to age 59 and 1/2.

Another useful tip: If you live in high income tax areas such as New York or California, invest in municipal bonds or municipal bond funds — they can provide you with a tax-free source of income.

Most conventional financial advice only recommends municipal bond investments to retirees. Again, the thought is that during your working years there is no need to create a tax-free revenue stream — your savings can instead be invested in assets that have longer term growth potential. As with dividends, the tax-free income that is generated by municipal bonds can either be reinvested, in the case of mutual funds, or used by you as income depending on your needs.

Other recommended reading on freelance finances: The SEP-IRA Explained — Retirement Planning for the Solopreneur

Consider your circumstances and trust yourself

Managing freelance finances and building a diversified portfolio of assets is challenging for everyone. It can be especially daunting for freelancers. Drawing on the skills that you already inherently have and applying them to your pursuit of financial well-being can make the journey easier.

You already realize that building your business successfully takes time, perseverance and dedication. The same is true of your finances. Building your assets consistently and incrementally — even if the regular amounts invested are small — will reward you greatly over time.

For artists and other freelancers, there will never be a standard, ‘cookie-cutter’ path to follow for our financial well-being. We must evaluate and re-evaulate our unique circumstances at all times to determine our best moves forward.

‘Herd mentality’ governs a lot of traditional financial strategy. Your ability to think outside of the box will help you find effective ways to maneuver outside of the mainstream.

Your ingenuity will serve you well as you navigate the financial investment waters. You’ve proven to yourself that you can blaze your own trail in your freelance business by drawing on established ideas and your own creative input. Do the same with your financial planning.

Editor’s Note: To get more of David’s helpful insights on freelance finances, watch his SAG-AFTRA presentation here.

David Maurice Sharp is author of The Thriving Artist: Saving and Investing for Performers, Artists, and the Stage & Film Industries. David’s background, including time as a dancer and a choreographer, lets him relate to his audience as an artist and as a financial professional. Named a money hero by Money magazine, David is director of solicitation for Prime Clerk, teaches workshops at HB Studio in NYC and serves as a panelist for The SAG Foundation.