Life as a freelancer is full of ups and downs. The flexibility and independence that come with self-employment are so attractive that many people get tripped up when it comes to the most significant downside: irregular income.

Freelance income is cyclical. As projects come and go, one month might see an influx of cash, while the next may run dry. Knowing how to navigate these financial waters requires a little strategic planning and a realistic approach to managing your money. But, that’s all doable. As a freelancer, you need to be adaptable and able to find balance. Once you get this down, you’ll be on the path to thriving in your freelancing career.

Identify Income Patterns

Handling irregular income is a juggling act. One of the first things you need to do is look for patterns. Start by keeping detailed records of your income, expenses, and project timelines. Know which of your invoices are paid, which are still outstanding, and how long it usually takes to receive payment for each one. Do this over several months, and you’ll start to see trends take shape.

Factors like market demand and time of year play a big part in this. Maybe your business sees a cash swell in the summer, but a slowdown going into the holidays. This is important to know. This will help you budget better and account for things like bills, emergencies, and other expenses.

Find the Average

Another strategy is to find your average monthly income and use that as your baseline. Start by adding up your total income over the last six months to a year. Then, divide this number by the number of months. That’s your average monthly income.

Say your freelance business earned $75,000 over the past 12 months. You’d calculate $75,000 ÷ 12, putting your average monthly income at $6,250, which helps give you an idea of what you have to spend and save. Note that you’ll need to account for taxes, too, and you’re responsible for setting aside the correct amount to pay each quarter (more on that later).

For a safer approach, you can also use your lowest-earning month as your earnings baseline for financial planning. This is a much more conservative method, but it can really cushion those leaner months.

Create a Budget, But Be Flexible

Budgets benefit everyone, and if you’re a freelancer, yours needs to be flexible. Here’s the gist of how you can build a flexible freelance budget:

• Separate Fixed vs. Variable Expenses: Identify your fixed expenses that are consistent each month (mortgage, rent, insurance, car payment, etc.) and your variable expenses that are subject to fluctuations (dining out, shopping, gas, medical expenses).
• Make a Savings Bucket: Whenever possible, you should be setting extra cash aside to balance out low-earning months. It’s also important that you’re saving something for retirement, whatever that looks like for you. This category will be variable based on what you have available each month.
• Prioritize the Essentials: Ensure that you have enough money (either coming in or in savings) to cover critical costs. These need to be accounted for before you indulge in any discretionary spending.
• Adjust the Variable Expenses: When your income dips, plan on adjusting your variable expenses to keep your finances stable. For example, if you’re having a lean month, cut out something like dining out or shopping for non-necessities.
• Check in Regularly: Budgeting is not set-it-and-forget-it. As your income changes or you notice new patterns forming, re-evaluate and re-allocate the buckets of your budget.

Separate Personal and Business Finances

As an independent professional, it’s critical that you open a separate bank account just to manage your business cash flow. Not only will this make it easier to track income and expenses, but it also helps separate your personal assets from your professional liabilities. It also simplifies tax prep, which can offer invaluable peace of mind.

As a tip, consider paying yourself a salary from your business bank account. This will create some structure in your professional life and can help stabilize your budget.

Build an Emergency Fund

An emergency fund is a must when you have irregular income. Without this safety net, you’ll be left vulnerable in the event of a sudden big expense. A medical crisis, major home repair, or loss of a client can leave you strapped and taking on debt to stay afloat.

Conventional advice says most people should sock away 3-6 months’ worth of living expenses. If you’re freelancing, you may want to aim even higher than that to avoid financial stress. It’s also important that you keep your emergency fund separate from any buffer savings account that you use to float you through leaner months. They do not serve the same purpose.

Figure out your monthly expenses and then multiply that dollar amount to see how much you’d need to cover six months. Set your savings target, and start making automatic transfers into this fund so you don’t even have to think about it.

Diversify Your Income Streams

When you’re freelancing, putting all your eggs in one basket is a no-go. Should you lose that client—which can happen suddenly—you’ll be left scrambling. Of course, there are no severance or unemployment benefits to fall back on, either.

Try to diversify your income streams as much as you can. Focus on building and maintaining relationships with a wide net of current and prospective clients. Think about expanding the range of services you offer, such as consulting about your niche in addition to working in it.

Having multiple income streams is a common trait of all financially successful people, not just freelancers. Take a page from this book and start building a robust financial foundation.

Organize Your Invoicing System

Getting paid accurately and on time means you’ve got to be organized with your invoicing system. Whether you’re doing it all manually or using software like QuickBooks or Zoho, it’s important that you stay on top of the entire process to keep your cash flow steady.

Pick a day that you’ll be sending out regular invoices to your clients. This could be every other Friday or the last day of every month. Whatever works for your schedule, be consistent with it. Make sure that there is also a mutual understanding between you and your clients about payment terms and due dates so no one ends up surprised.

When an invoice gets paid, promptly mark it as such in your records so you never overlook a missing or delayed payment. And, in the event there is a delay, it’s important to communicate clearly with your client about the issue in a professional but firm manner.

Get Smart About Tax Planning

Finally, the big one: As a freelancer, your tax situation can get complicated. You must pay regular income tax, but you’ll also be subjected to a 15.3% “self-employment tax.” This covers both the employer and employee share of Medicare and Social Security taxes under the Federal Insurance Contributions Act (FICA).

Through traditional employment, you and your employer would each be responsible for half that amount—7.65%—which you could have automatically withheld from your paychecks. Freelancing means you not only pay both shares (you are both the employee and employer, after all), but you also need to set aside the correct amount of money to pay for both FICA taxes and income tax.

It’s often recommended that freelancers set aside between 25-30% of all income to meet their tax obligations. In other words, if you earn $5,000 in a month, setting aside 25% for taxes would be $1,250. If your income is fairly consistent on a year-to-year basis, you can fine-tune those numbers further, using the previous year’s income to set the groundwork for the current year.

And there’s one more caveat: Tax Day for you is no longer zeroed in on one day in April. You must make estimated tax payments every quarter.

Working with a tax professional can be invaluable when you’re self-employed. Not only can they help accurately calculate your tax obligations, but they can also help you set up quarterly payments, find the best deductions, and factor in anything else in your life that affects your tax burden, like having dependents. While, yes, this is an added expense, they can be worth their weight in gold.

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