🔑 How I automate business & personal finances (without the chaos)

Today, in 10 minutes or less, you’ll learn:

• 💸 Why growing revenue can counter-intuitively leave you feeling broke (and the 5-step system that fixes it)
• 🏦 How to implement a Profit First automation that avoids cashflow chaos
• ⚡️ The exact workflow that separates business profits from personal spending (with real percentages and timelines)

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⚡️ How I automate business & personal finances (without the chaos)

Recently, my wife and I finished our May Money Review in just 15 minutes.

I used to be flying blind - like some entrepreneurs I know - when it comes to managing business and personal finances.

Mixing personal and business expenses, having no clear profit allocation system, and wondering why you’re always stressed about cashflow.

Until I made a few non-obvious but crucial changes.

In this newsletter, I'm breaking down exactly how I integrate and automate my business and personal finances - avoiding the chaos that plague a lot of fractionals, entrepreneurs, and small business owners.

☁️ Dream vs reality

Many people start a business with a dream of growing profits rapidly, paying yourself a FAT monthly salary - and having plenty left over EOY for rich bonuses for you and your staff.

However, the reality just hits different.

Especially when starting a service business. (Helloooo “feast or famine” cash cycles!)

A couple years ago, my business revenue was growing, but I felt broke.

Money would flow in, then disappear into sporadic spikes of a SaaS annual subscription renewal and self-employment tax payments.

I'd pay myself randomly. Sometimes $0 one month, $10k another month.

This made it tough for me to plan my family finances. How much can I contribute to our joint expenses? Joint sinking funds? Man I had no clue.

It felt like nothing was predictable.

Sounds familiar? Perhaps you’ve been there (or are there right now!)

That pain led me to spend dozens of hours researching and implementing the 5-step system I have today:

🏦 Step 1: Set up Profit First allocation

The first step was fixing my business accounts - er… account.

Because I basically only used one.

Today, I’ve implemented the Profit First playbook by setting up auto transfer rules in my Mercury Business accounts.

I suggest using any bank accounts that allow you to set up auto transfers:

👉️ How I implemented this:

Every dollar that hits my Mercury Business income account gets automatically allocated:

• 30% Operating Expenses
• 50% Owner Pay
• 15% Taxes
• 5% Profit

On a daily basis, the revenue that hits my main accounts get distributed immediately to separate accounts using these percentages.

Even though this workflow sounds deceptively simple (how boring!), I can’t overstate how helpful it has been to calculating my expected spend on OpEx and Owner’s Pay.

Instead of wondering, “do I have enough cash?”, all the time…

Now I can just look at my bank sub-accounts and answer that question.

Pro-tip: Check out these Profit First guidelines on Profit, Owner’s Pay, Tax, and OpEx splits:

Next, let’s talk about paying yourself:

💼 Step 2: Establish consistent owner pay

I recently converted my US LLC to be taxed like an S-Corp.

Don’t worry if that means nothing to you - this isn’t going to be a US tax deep dive.

However, what matters for this article is that I can pay myself in two ways:

1. W-2/employee salary
2. Owner distribution

👉️ How I implemented this:

For (1), I set up Gusto to pay myself a monthly paycheck as consistently as possible.

Payroll compliance gets complicated, so I like using a tool like Gusto to handle things like tax withholdings automatically.

Note: Each state / country has its own payroll rules - e.g. pay frequencies, pay methods, etc. Definitely follow these to your best ability to avoid potential fines/penalties.

📊 Step 3: Optimize recurring expenses

When I started out, I kept getting hit with sudden spikes in SaaS subscription renewals, quarterly tax payments, and contractor payments.

👉️ How I implemented this:

Now I’ve smoothed out some things (not perfect, but getting there):

1. Converted majority of my SaaS to annual subscriptions that start in December - this helps me forecast how much cash I’ll need in my account by December
2. Pay my self-employment tax monthly automatically as part of my payroll instead of needing to remember quarterly estimated tax payments
3. Asked my team members / contractors to send me monthly invoices so I handle payouts in 1 batch per month
4. Auto-track my business expenses broken down by category using Kick.co

Of course, I still have miscellaneous spikes for things like attending conferences and business travel. However, my expenses - and therefore cashflow - are much more predictable than before.

🏠 Step 4: Design personal finance workflow

After getting married, it took several months to decide how we combined our finances, joint spending, and joint savings goals.

No, we’re not a “Combine ALL THE THINGS” kinda couple. (Although we do view our portfolio as “our portfolio.”)

We adopted a Yours, Mine, Ours approach:

• Joint checking for fixed costs (rent, utilities, groceries/food)
• Joint savings for goal #1 (honeymoon)
• Joint savings for goal #2 (family/childbirth)
• Joint investment for goal #3 (529 college fund)
• Joint investment for goal #4 (K-12 fund)
• Separate personal spending + investing accounts (retirement)

👉️ How we implemented this:

1. Open a Mercury Personal account ($240/year) - which has been great because it doesn’t require a SSN to add my non-US spouse as user on bank accounts.
2. Set up a savings or investment account per joint sinking fund
3. Add my individual checking account to payroll in Gusto
4. Set up transfer from personal checking to joint checking
5. Set up transfer from joint checking account to each joint sinking fund/investment account (and our personal checking to personal retirement)
6. Boom! We have our savings/investments allocated

🔄 Step 5: Automate what’s possible

Taking care of this stuff manually blows, so naturally I’ve tried to automate what I can:

• Profit allocation (Mercury auto-transfer)
• Owner salary (Gusto)
• Sinking fund transfers (Mercury auto-transfer)
• Investment contributions (Brokerage auto-contributions)
• All bills (autopay)

👉️ How I implemented this:

Want to see how this plays out? Here’s an example monthly schedule that’s inspired by my own workflow:

🙅‍♂️ What this system won’t do

This system feels like I got a real engine working behind the scenes now, but it’s definitely not perfect either:

• It won’t solve underlying business problems. If you don’t have profitability, the profit first system isn’t going to help.
• It won’t eliminate the “feast and famine” nature of service businesses. It will help you manage it, but the other part is stabilizing revenue.
• Finally, it won’t set itself up. You’ll need to do maybe 1-2 hours of upfront work, but once it’s running it’s pretty simple to maintain. (I just tweak Gusto and Mercury once a in awhile.)

✅ Next steps

My favorite part isn’t just the time savings. It’s the peace of mind.

I have a clearer picture of where the money comes from and goes - so I can just get back to doing what I do best in my work and life.

Here are the steps we covered:

1. Setup Profit First allocation
2. Establish consistent owner pay
3. Optimize recurring expenses
4. Design personal finance workflow
5. Automate what’s possible

So there you have it. Wishing your next money review takes under 15 minutes (or none at all!)

Thanks for reading. What's your biggest challenge with handling business or personal finances? Hit reply and let me know.

💎 Last Week’s Gems

👵 What % of retirees do you think spend down their principal in retirement? I’m shocked by this stat: “Across all wealth levels, 58 percent of retirees withdraw less than their investments earn, 26 percent withdraw up to the amount the portfolio earns, and 14 percent are drawing down principal.”’

🧑‍💻 NYTimes: Don’t Call It a Side Hustle. These Americans Are ‘Polyworking.’ Polyworking isn’t what I expected as the mainstream manifestation of portfolio careers, but I’ll take it. Step in the right direction I suppose 🤷‍♂️ 

🛢️ I just finished reading Kochland - an investigative book about Koch Industries, the 2nd largest private company in the US, family-owned, and one of the most secretive. The CEO and his brother were at one point wealthier than Bill Gates. Absolutely fascinating read.

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Community Spotlight: Li Si Wong

Li Si is a senior product leader and founder of The Side Door, where she writes monthly insights on pattern recognition in business and life. She currently leads product at Altus, a scale-up in the project management space. She’s based in Melbourne.

How would you describe what you do to someone outside of your industry?
I decide what problems need solving and then collaborate with others to find effective solutions.

What triggered your interest in exploring the portfolio path?
I started wanting to be more intentional with how I spend my time - especially around who I meet with and what I say yes to. That shift in mindset opened up space for me to explore different paths outside of the traditional 9 to 5.

What’s your current portfolio career mix?

1. Product management for scale up
2. Real estate
3. Investment portfolio

What advice would you give to someone starting a portfolio career?
It’s okay to experiment. You don’t need to have it all figured out - just start, learn from what happens, and keep iterating. One quote that really shapes how I make decisions: “If it’s reversible, the biggest risk is moving too slow. If it’s irreversible, the biggest risk is moving too fast.” 

What’s a fun fact about you?
I have an unusual mixed-handedness trait! I write and play sports with my right hand, but instinctively use my left hand for everyday tasks like brushing my teeth, using my phone, and combing my hair. Apparently, this pattern of task-specific hand preference only occurs in about 1% of people and suggests unique brain wiring!

What's one piece of media that impressed you lately?
Tenacity is a Success Code by Dr. Julie Gurner

How can people connect with you?
LinkedIn

P.S. Did you enjoy this spotlight? Hit reply and let me know—or suggest another amazing portfolio pather we should feature next!

💌 Reader Notes