That might sound overwhelming, but it’s actually pretty straightforward once you break it down. So let’s look at each of these elements individually.

Rather than coming up with an arbitrary figure, take the recommendation of Veronica Dostal, an accredited financial counselor and financial coach who regularly works with the self-employed. She suggests that you think along the lines of three different savings buckets and work backward. For instance, the most obvious type of savings you’ll need is the true emergency fund. These savings are intended to cover things such as medical emergencies, unplanned (and expensive) home repairs, or the occasional $1,500 auto repair bill.

New freelancers also need reserves to cover income shortfalls that arise during the first year or two in business, before the work is steady and predictable. But even established freelancers should set aside some funds to cover slower months.

Finally, there are expenses that are more predictable but still outside your regular budget—things such as property taxes, back-to-school clothing for the kids, and preventative maintenance for your car. These aren’t true emergencies, but they are expenses that may be difficult to fund from your monthly cash flow, so you should create a cyclical set-aside to fund them.

All these savings buckets can go into one main savings account. But track the amounts in each bucket so you know what you have set aside in each and can better determine which one, if any, may need additional funding as your situation changes. Once you have your savings buckets set up, you can start thinking about how much you actually need in each. Most financial advisers suggest keeping three to six months of total living expenses in your emergency fund. However, because your income as a freelancer can vary month to month, especially when you’re getting started, I strongly suggest you shoot for at least six months of living expenses (not income but actual living expenses), which you can split between your emergency fund and your income-shortfall reserves.

Health insurance. Regardless of your age or current state of health, you’re putting yourself and your family at great risk if you don’t have health insurance. With today’s high medical costs, just one trip to the hospital can wipe you out financially. Unfortunately, it’s not always easy to get coverage as a solo professional. In the United States, health insurance is tied to your employer, so if you decide to go out on your own, your choices are somewhat limited. And if your spouse isn’t employed or doesn’t have access to health insurance benefits through his or her employer, your only option may be to seek individual coverage.

In many cases, individual coverage costs more (both in terms of monthly premiums and out-of-pocket costs) than does comparable coverage through an employer. But what many freelancers fail to realize is that the objective is not necessarily to obtain the same level of coverage you may have had as an employee. The objective is to get access to quality care—even if you have to pay slightly higher premiums than you were paying as an employee—while also covering your risk of catastrophic medical events.

Additionally, in the United States, health savings accounts (HSAs) make higher out-of-pocket medical expenses much more affordable by allowing you to pay for them with after-tax dollars. And in some cases, you may be able to deduct the cost of your premiums as a business expense, further reducing your overall burden. Also, organizations such as the Freelancer’s Union (FreelancersUnion.org) offer group-rate health insurance to independent workers in a number of states.

A great place to start your search is with a good insurance broker. These professionals have already invested the time to learn all the options. They know the ins and outs of the business. They know the pitfalls. Better yet, you don’t usually pay extra to buy the policy from a broker (brokers are paid a commission by the insurance company), which means that their advice is free!

Whatever your situation, don’t give up on your goal to become a full-time freelancer just because you believe you’re not insurable or adequate coverage will be out of your reach. Seek the advice of a professional. There may very well be a workable option for you.

Long-term disability insurance. Long-term disability (LTD) insurance is designed to replace a portion of your income should you not be able to work because of a disability. Statistically, your chance of sustaining a serious injury in your 30s or 40s is much higher than your chance of dying. Yet surprisingly, 60 percent of working adults in the United States do not have disability insurance, according to the Health Insurance Association of America.

Your ability to generate an income is one of your most important assets, especially if you’re the sole breadwinner or even a contributor to your family’s total income. You need to protect that asset, and that’s what LTD insurance is designed to do. Let me warn you, though: LTD insurance is not cheap. But considering the risks of not having a policy, the expense is often justifiable. Talk to your broker about the best options for your specific situation. And be sure to shop around.

Life insurance. The final type of policy you may want to consider is life insurance, which is designed to help replace lost income in the event of your premature death. Now if you’re single and have few obligations, you may not need life insurance. But if you have a spouse and children who depend on your income, life insurance is a lot more important, unless you’re already financially independent and your assets could support your family in the event you were no longer in the picture.

You may want to consider a policy for your spouse, even if he or she does not generate an income. My wife is currently a stay-at-home mom. She doesn’t generate an income, but we bought a term policy for her a few years ago. In the event of her premature death, I would still need to work full-time, and that would require me to hire someone to take care of our son while he’s not in school on weekday afternoons and summer vacations, for example. Child-care costs money—money I don’t currently budget for. So that’s where her policy would come in.

Many people put off the life insurance issue because they don’t want to think about their or their spouse’s death. Yes, it’s downright depressing to think about death and the emotional impact it would have on your family. But it’s even sadder to see a family struggle as a result of a parent’s passing. I’ve seen it firsthand, and it’s not a position you want to be in. So get in touch with a good insurance broker or agent and review the best options for your situation.

Professional liability insurance. Also called errors and omissions insurance, professional liability insurance coverage protects you from allegations of poor decisions or bad advice. Now before you panic, you should know that most freelancers won’t need such coverage. Not only is it overkill in many cases, it’s also very expensive. Plus, the exact definition of “wrongful act” (the event that would trigger coverage) varies from policy to policy, so you need to be careful about what’s excluded from coverage and how much the policy will pay out in the event of a lawsuit. You could end up paying for something that doesn’t cover your biggest risks.

Consult with an attorney who knows your business well or who at least works with many self-employed professionals in fields similar to yours. Find out what the risks are and what type of policy—if any—would make sense for you. If you determine it’s worth buying some degree of coverage, have your attorney review the quotes you receive and help you make the best decision.

At the same time, many people are now challenging the whole idea of retirement. They’re exploring other alternatives that are better aligned with their goals and values. For instance, in his best-selling book, The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich (Crown, 2007), Timothy Ferriss introduced the concept of “mini-retirements”—the idea that instead of saving it all for the end, we should redistribute our retirement savings throughout our lives and use them to take mini-retirements of one to six months every year.

I agree with much of Ferriss’s reasoning on why the traditional view of retirement may need revising. However, whether you subscribe to the traditional model or are inclined to follow a more unorthodox mini-retirement lifestyle, you still need to create a nest egg to fund your plan. Even if you’re not currently sure which direction you’ll take, it’s a good idea to start saving now, if you haven’t already. At a minimum, a sizable retirement savings account buys you freedom and flexibility—especially later in life, when you may not have the patience or desire to put up with other people’s crap!