Written by When you work for yourself, it’s easy for work to feel like, well, your whole self. Or at least your whole financial life. Chances are you took big risks to make your business happen, so it makes sense that you want to focus on growing your brainchild (and, yes, increasing your income).
But when it comes to real financial security and long-term wealth, even a very successful and sustainable business model doesn’t offer a guarantee. Financial wellness, like physical wellness, is about developing consistent habits — and many of those routines occur outside of your business pursuits, even as a small business owner or solopreneur. But your self-employed status does have an impact on the specific types of habits that will best suit your needs.
Below, we’ve gathered four of the most important strategies for entrepreneurs who are working to establish financial security and build long-lasting wealth. From gearing up for retirement to staying ahead of short-term emergencies, a few simple steps (and a little bit of persistence) can go a long way. Let’s dive in.
1. Have your own back in retirement
One of the biggest perks to give up when leaving a salaried position is the option for employer-sponsored retirement savings. Compared to Individual Retirement Accounts or IRAs, 401(k)s have much larger annual contribution limits — $23,500 as opposed to just $7,000 for savers under 50, in 2025.
IRAs are a popular option for self-employed people because, so long as you’re talking about a traditional IRA, anyone who earns a taxable income — or is married to someone who does — can contribute. But there are other effective ways to save for retirement that are geared specifically toward self-employed people, entrepreneurs and small business owners.
- SEP IRAs, short for Simplified Employee Pension IRAs, allow self-employed individuals to contribute up to 25% of the income you earn through self-employment up to a maximum of $70,000, which puts the 401(k)’s annual contribution limits to shame.
- With a SIMPLE IRA, or Savings Incentive Match Plan for Employees, small business owners with 100 or fewer employees can contribute to their retirement plan as both employer and employee. (If you do have other employees, though, you’ll be required to contribute to their SIMPLE IRAs, too.)
- Solo 401(k)s, which are also known as Solo-ks and Uni-ks, also allow a business owner with no employees to contribute from both sides of the desk (as employer and employee), allowing deferrals of up to the same annual contribution limits as a regular 401(k) — and up to 100% of a self-employed individual’s earned income.
The type of retirement plan that will work best in your case depends on your business structures, whether you have employees (and if so, how many), how close you are to retirement and how aggressively you plan to save for it.
But for many small business owners, these alternative account types can boost retirement savings well beyond the confines of a traditional or Roth IRA, especially for those closer to retirement or with enough income to afford substantial contributions.
Just make sure that, whatever account you choose, you’re making regular contributions — and allocating them into assets.
2. Keep a substantial emergency cushion
You’ve probably heard the adage that a well-stocked emergency fund should hold between three and six months of living expenses.
That’s a good rule of thumb — for people who work for a steady paycheck. In the world of self-employment, things can be a little less predictable, which means that you may find yourself tapping into your savings cushion on a more regular basis between natural income fluctuations.
That’s why some experts suggest that self-employed people and entrepreneurs boost their emergency fund to at least six months, up to a full year’s worth of living expenses.
As with any emergency fund, remember that you want to keep it liquid, rather than investing it (and risking it) on the stock market. These are funds you want to be able to tap into immediately if and when you need them. It may seem like a lot to save, but having a robust emergency fund in place can help you avoid relying on credit cards or other less-than-wise financial strategies in a pinch.
3. Work with your advisor on tax-saving strategies
If you’re a small business owner, chances are you’re already on top of basic tax-saving strategies, like writing off deductible expenses. But the tax code is dense, and every business structure has its own unique set of rules that can be difficult to master. That’s why your first and best line of defense for maximizing your tax savings is a financial advisor.
A good financial advisor might inform you that, if you’re making good money as a freelancer, you might save a hefty amount of taxes by incorporating an S corporation, often shortened to S corp. With an S corp, not all of your income will be subject to self-employment taxes — just the part you “pay” yourself as an employee. However, there are upfront costs and tasks associated with incorporating, and some risks involved. A fiduciary advisor is the person to turn to when you need help making these decisions — and taking full, safe advantage of them.
4. Create passive income streams
As much income as your business can generate, finding passive income streams outside of your business is a great way to round out your portfolio and build sustainable, long-lasting wealth you and your family can rely on. This can look like market investments, yes, but also tangible assets like real estate and even fine art. Besides, work can’t really be your whole life — so you might even think of your investing habit as a hobby!
Although it’s easy to lose the forest for the trees when it comes to launching and nourishing a successful business, a well-rounded approach involves keeping tabs on every part of your financial well-being — and not just your startup’s bottom line. By making a few smart, strategic choices and building habitual savings into your day-to-day, you can set the foundation for not just a strong business, but also a comfortable life.