I've shown you ways to make money with AI, so let's talk about what happens when you actually start making some. The balance your bank app shows you is the wrong number to pay yourself from.
If you came from the video, this is the spreadsheet I walked through, with the reasoning behind each row and the mistakes that throw it off. It takes about ten minutes, and you redo it every time before you move money to yourself.
The four numbers you need
Open a blank spreadsheet. Everything comes down to one amount of cash and three things you subtract from it. The only rule is that nothing gets counted twice.
Cash that's actually cleared
The money sitting in your business account right now. Don't include invoices someone hasn't paid yet, or a payout that's still pending. If it can't be spent today, it doesn't go in this row.
Bills you still owe
Software, contractors, refunds you'll need to cover, anything you've committed to that hasn't been paid. Don't subtract something that's already come out of the balance in row one.
What you're keeping for taxes
The amount you're setting aside for taxes that's still sitting in this account. Use an estimate for your own situation rather than a percentage you saw online. If you already moved your tax money to a separate account, it's out of row one, so leave this at zero.
A cushion to keep the business running
The cash you need to cover costs until the next payment comes in, plus a bit extra in case that payment is late. Again, don't include bills you already listed in row two.
A worked example
These numbers are made up. You've got $2,500 cleared in the business account. $350 is committed to bills, $450 is set aside for taxes, and you want to keep another $700 in the business as a cushion.
$2,500 minus $350, $450 and $700 leaves $1,000. That's the amount you could consider paying yourself, as long as you've included everything. If the answer comes out negative, that's a shortfall you need to cover before you take anything out.
Copy the sheet
Paste this into the first cell of a blank Google Sheet or Excel file. It lands in columns A and B, and the last row does the math for you. Swap in your own numbers.
Item Amount
Cleared business cash 2500
Unpaid commitments 350
Tax reserve still in this balance 450
Additional operating cushion 700
Available after reserves =B2-SUM(B3:B5)If you'd rather have AI check your numbers, give it the four rows and this prompt. It's good at catching double counting, which is the mistake that makes this go wrong.
Here's my side business cash for this month:
Cleared cash: $[ ]. Bills I still owe: [list them]. Tax money still in
this account: $[ ]. Cushion I want to keep: $[ ].
Check whether any bill is counted twice or already came out of the
cleared cash. Tell me if anything looks missing. Then show me the amount
left after reserves. Don't give me tax advice, just check the math.What throws it off
Counting money you haven't received. An invoice that's sent isn't money in your account. If a client pays late, you've already spent it.
Subtracting the same bill twice. If your software subscription already came out this month, it's not in row one anymore, so it doesn't go in row two either. The same goes for tax money you already moved.
Treating the result as permission. The last row is the most you could take out, and it's fine to take less. How owners can pay themselves also depends on how your business is set up, so if you've formed an LLC or anything else, check how that works for you. The IRS has a plain overview of taxes for self-employed people to start with.
This is a simple cash check for a solo side business. It isn't a profit calculation, a tax estimate or financial advice. If the numbers are getting big or complicated, that's a good time to talk to an accountant.
Once you know what you can take out, the next question is where it goes. I walk through that order in savings, debt, or investing first, and if you don't have a cushion for yourself yet, start with building an emergency fund.