Solopreneur Financial Planning: What You Need to Know

When you started working for yourself, you knew that you were signing up to be in charge of everything. Not only do you have to think like a CEO, but you're also the entire finance department. You're responsible for generating revenue, managing expenses, setting aside taxes, and planning for your future.

Solopreneur financial planning may not be the most glamorous part of running a solo business, but it's one of the most essential. A clear plan gives you stability and reduces stress.

I was lucky: I worked in the banking industry for more than 15 years before I started working for myself. I knew most of the financial fundamentals about budgeting and taxes. And I also understand that finances can be really intimidating for people who don't have the same background.

Here's how to build a solid financial foundation as a solopreneur.

Create a budget

From the beginning, you've got to understand a basic number: How much do you need to earn to pay for your business expenses (including taxes) and your living expenses? That's the basis of your first budget.

For me, it was easy to calculate this number. I'd just lost my full-time job at a marketing agency. I knew I wouldn't be able to replace my salary immediately, but that was my goal.

Your business expenses include all of your monthly spending:

• Apps and tools you pay for
• Subscriptions
• Taxes you'll need to pay
• Insurance
• Co-working space
• Contractors or a virtual assistant
• ...and anything else you need to run your business.

Then you look at your income: how much you earn on average per month. You'll also look at how variable your revenue is (which can help you plan for slower months).

The difference between your income and your expenses is how much you can "pay yourself" every month. Transfer that money to a separate, personal checking account.

Whatever remains should be allocated intentionally. I have multiple business savings accounts to save for taxes, reinvestment into the business, and an emergency fund. If I have a slower month, I change how much I put in these different accounts (example: less in emergency fund, or skip the business reinvestment account altogether).

Your budget doesn't have to be complicated, but you should revisit and adjust it as your business grows and your income/expenses change.

How to Budget as a Freelancer: A Real-World Example

Tips to get started.

Anna Burgess YangAnna Burgess Yang

Look for ways to save money

Solopreneurs often spend more than they realize. A quick audit of your expenses can reveal opportunities to save — even without cutting the tools you rely on.

One of the easiest ways to save money is by switching subscriptions from monthly to annual plans. Some apps offer savings of anywhere from 15 to 30% for an annual plan. The upfront cost can feel like a lot, but over the course of a year, the savings add up.

Next, evaluate your tech stack. Ask yourself:

• Are you paying for multiple tools that can do the same thing?
• Can you consolidate tools?
• Can you downgrade your plan?

It's common for tools to creep into your monthly budget over time, especially when you move fast. Maybe you signed up for a tool with the intention of using it, but then it never pans out. Or you signed up for a free trial and forgot to cancel. A quarterly review keeps your expenses aligned with what you actually use.

For example, I used to pay for a tool to collect e-signatures on contracts. But I rarely used it, because sometimes my clients use their e-signature platform. It felt like a waste, though a necessary waste. Then Google Workspace introduced e-signature as a free add-on within my existing plan. It's not fancy, but it met my needs. So I cancelled the e-signature product I was paying for.

Don't forget your non-software expenses, like your liability insurance and bookkeeping. These are important, but you should still evaluate whether you're paying for the right plan for your business size and stage. I recently changed insurance companies to save money on my premium.

Several small changes can have a big impact on your finances over the course of a year.

Understand your taxes

Taxes are unavoidable — and they can be a huge source of stress for solopreneurs. If you don't plan ahead, you might get hit with an unexpected tax bill.

You'll owe taxes based on your income, but you don't pay taxes until later. Get into the habit of setting money aside for your taxes every time you get paid (or once a month, if that's easier). Your tax rate will depend on your income and business structure, but a general rule of thumb in the U.S. is to save 25-30% of your net income (your income minus your expenses).

If you're in the U.S., don't forget about quarterly estimated tax payments. These are due four times per year. Paying them consistently helps you avoid penalties. A tax professional can help you plan for what you owe and avoid common mistakes (like forgetting to calculate state taxes, in addition to federal).

Finally, make sure you keep accurate records of your income and expenses. Whether you use software like QuickBooks or Wave, or a simple spreadsheet, it will make your tax time much easier.

Think about retirement

When you're self-employed, no one is setting up a retirement plan for you. It's on you to build your own safety net.

In the U.S., many employers offer a 401(k) retirement plan. You can open one as a solopreneur, whether you operate as a sole proprietor, an LLC, or a Sub S Corporation. A solo 401(k) is designed for solo businesses and has tax benefits.

Even if you can't contribute much right now, start with something. The habit matters more than the amount. As your income grows and your business becomes more stable, you can increase your contributions.

A quick Google search for "solo 401(k)" will show you a lot of companies that offer retirement plans for solo businesses. You can use a large company like Fidelity or Vanguard, or go with a company that specializes in small business investing.

Take control of your business finances

With the right solopreneur financial planning, you free yourself up to make better decisions in your business.

A financially prepared solopreneur can weather slow seasons, know how much they need to earn, and step away from work without panic. I had to take long-term leave for medical reasons, but between my savings and cutting to the bare minimum for business expenses, it ended up ok.

Start with small, consistent steps, and your financial foundation will get stronger every month.

Need to review the health of your business?
Check out my free checklist for solopreneurs.

Download