Financial Independence For Women 08 – Monthly Profit or Loss.

Chapter 8 – Week 3.

“That which we persist in doing becomes easier – not because the nature of the task has changed, but our ability to do it has increased.”

– Ralph Waldo Emerson


Welcome back! I want to acknowledge you for your persistence. I hope that you celebrated yourself after last week’s coursework. Did you give yourself flowers? If not, what did you do? Remember that acknowledging yourself for your work is vital in creating new habits – so if you didn’t do anything for yourself last week, this week you must. It’s important to take some action toward yourself to let yourself know that you are doing great work!

I want you to know that we’re reaching the halfway mark of the course. How do you feel about this? What kinds of feelings came up for you last week? I suggest taking some time to write in your journal about your feelings this week or talk to a trusted friend or your partner. This will help you move out old messages and make space to move forward. Is it a deal?

This week we are going to focus on your Monthly Net Profit or Loss. Have you heard of this term?

Let me give you the definition:

Net Profit is calculated by subtracting your monthly expenses from your total monthly income.

The formula looks like this:

Net Profit = Your Total Monthly Income – Your Total Monthly Expenses.

Can you guess why this might be important to calculate?

For some of us, instead of a having a monthly net profit, we are operating at a monthly net loss. If this is you, it’s time to change this. Remember this course is about Taking Control of Your Money. This week’s exercises will help you do exactly that.

I want you to know that every decision that you make in life is part of a financial decision. A lot of us don’t think this way though. Even though we may know this deep down, most of us don’t want to admit it. We’d rather operate in a way a bit like an ostrich – by burying our head in the ground and  pretending  that  money  is  not that important – or even worse, pretending that it doesn’t exist. Like a friend of mine used to say, “I just sign the check … and the bank pays.” She was very surprised to find out that the bank at a certain point stopped paying and closed her account.

For example, let’s say that you decide you want to join your local gym to get in better shape. You go ahead and pay the membership fee (without even checking to see if they have any special offers). You buy the latest workout gear, and you sweat it out at the gym for a few weeks.

Bit by bit though you get busy at work and you are going to the gym less frequently. Instead of going three times a week like you used to, you now are going only three times a month. Eventually you get so busy at work that you don’t go to the gym … ever. Sound familiar? You paid your yearly membership, but you are  not  getting what you paid for. You tell yourself that you don’t care and resign yourself to just being  out  of  shape  for  a while.

The thing is though that these small amounts of money end up having a big impact over time. For example, let’s say your monthly membership is $45 a month. Over a year that means $540 that you could have saved! I bet you could have used that money for something else in your life. Or what if you had checked for the special offers?

Let’s say you paid $45 a month, but if you had checked the special offers you might have found that if you bought the morning gym pass the cost was only $32 a month. Over a year you would have saved $156! It seems obvious to do these calculations, but the truth is – most of us don’t take the time to do them.

Do you see now how your choice to join the gym was a health decision in one realm, but in another realm, it was also a financial decision?

The problem with this is that when you make decisions without running them through a healthy financial filter, those decisions can have a detrimental effect (added up over time) on your future. I don’t mean to scare or overwhelm you, but want to make the point of how important it is to wake you up to the fact that every decision you make has a financial impact on your future. By committing to this 6-week course, you are changing the conditions for your future in a big way.

Going back to the gym decision, instead of asking yourself (if you even did this): “Can I afford this right now?” – Another way to look at this (with a healthy financial filter) would have been to ask your self:

  • “How will this additional monthly payment affect my net income?”
  • “What impact will this have on my annual budget?”
  • “How does this fit with my net worth targets?”

You might laugh at this at first and think it is absurd to be asking questions like this. For goodness sake, you just wanted to get in shape! I want you to know I’m not suggesting being uptight and checking your bank account every moment of the day, but I am suggesting that you know where you stand financially.

Do you know how much money you have coming in each month and how much money you have going out? If not, don’t worry. This is what we will be working on figuring out in the upcoming exercises.

First though I want to say that you don’t have to be a financial expert to guess that the secret to having money left over each month to move your dreams into reality is to spend less money than you earn. The dream home in California, the 3-day work week, and the vacation in Italy, are all hiding in the difference between what you earn and what you spend.

You see – your income has two functions: First, it has to pay for your current lifestyle. Second, it has to contribute to setting up your future. If you use all your income to pay for what’s happening in your life now, then you will have none left over to put towards tomorrow, next week, next month, next year … your future.

So, if you are not currently putting any money right now toward your future, my suggestion is to take your monthly income and BEFORE you do anything else, put 10 percent towards tomorrow. This means before you start using your money to pay for your  necessities  and  other  expenses, put 10 percent into a savings account. This money will be working for you as it will give you interest – and will help take care of you in the future.

For some of you this may sound impossible to do right now – but it’s easier than it sounds. Think about how many times you have agreed to a payment plan to pay off a bill? You paid a small amount each month until you eventually paid everything off. This time, you will be paying yourself. But before you can decide whether or not you will put 10 percent towards your future, you need to find out: 10 percent of what?

Calculating Your Monthly Net Profit or Loss.

Exercise One – What Is Your Monthly Income?

This exercise is designed to help you document how much money you have coming in each month. In financial terms, this is your monthly “Income.”

Part 1: List your sources of income and Calculate.

Take out your notebook and on a fresh page write “Income” across the top. In the left column, write down all of your sources of income. These include your salary, business income, passive income, royalties, child support, etc.

Next, write down how much each one of these sources of income provides for you each month. If your salary is inconsistent or is commission-based, take your total annual salary from the last year (less any exceptional income that you might not usually have) and divide that number by 12. This will give you your monthly income. Fill out the following:

I know how much income I have every month – It is…..  If you prefer, you can use the chart below.


Your Income







Every 3 Mtns

Every 6 Mths



Sample 1






Sample 2





a. Salary*


b. Business Income**


c. Rental


d. Child



e. Second Job


f. Dividends


g. Other


Your Annual Income:


Your Monthly Income:

  • If your salary is irregular or commission based, take your total annual salary for the last year (less any exceptional income that you might not usually have) and divide by by 12.


  • Net of expenses and taxes.
Exercise Two – Establish Your Expenses.

The exercise is designed to help you identify how much your life is currently costing you. In financial terms, this is establishing your “Expenses.”

Part 1 – List your expenses.

Now this time, really don’t panic. I know that admitting to what you spend can be a frightening thing. BUT ACTUALLY, knowing what you spend your money on and how much you spend will give you a ton of power – and ultimately make you a lot more comfortable. Remember this course is about Taking Control of Your Money. Without the knowledge of where your money is going and in what amounts, there isn’t much hope of financial independence. So let’s do this together … one step at a time.

Here are some headings to jog your memory about where your money might be going (you may have some of your own to add:





Every 3 Mtns

Every 6 Mths


Bank Charges


Books/ Magazines


Car Lease


Car Insurance


Car Maintenance


Car Tax


Charitable Contributions


Credit Card Interest










Every 3 Mtns

Every 6 Mths












Fuel (home)


Gas (car)










Holiday House


Household Equipment


House Maintenance


Investments (list each one)














Kids’ Care


Kids’ Clothing


Kids’ Toys


Legal/ Professional fees


Medical, Medical Insurance






Every 3 Mtns

Every 6 Mths




Personal Care


Pet Care






School Fees


Stationery/ Postage
















Use this list or make your own.

Part 2: Calculate your Monthly expenses.

Now that you have made your list, it is time to collect all of your receipts, credit card statements, and bank statements to find out how much money you are spending each month.

Step 1: Write down the amounts for each heading you listed.

Here are the answers to some questions that often come up when doing this exercise:

Q: What do I do with bills that I pay once yearly?

A:  You divide these by 12 and put the value in each month. For example, if you pay your car insurance once per year, you still drive your car for 12 months so the cost is actually a cost to you each month.

Q: What do I do with bills that I pay twice yearly or bills I pay quarterly?

A: If you pay twice yearly, multiply the figure by 2 and then divide by 12. This will give you the monthly cost. If you pay quarterly, multiply the figure by 4 and then divide by 12.

Q: What do I do if my expenses are mixed between business and personal?

A: You need to fill out separate expense sheets for business and personal.

Q: What if I run two households?

A: If you run two households, fill out an expense sheet for each. This information will give you clearer data for making decisions for each household.

Q: Christmas is a big expense in my household. Do I put it all in December?

A: Even though you spend the money in December, estimate the amount you spend on Christmas and divide it by 12 and add it into your monthly expenses. The same goes for your summer holiday and other seasonal events. You still need to earn the money throughout the year to finance these!

Step 2: Add all of the categories together. The number you arrive at is the total value of your monthly expenses. Fill out the following:

 I know how much money I spend each month. It is: …………………….

Exercise Three – Do You Have a Monthly Net Profit or Loss?

Now that you have your monthly income figure and your monthly expenses figure, it’s time to figure out if you have a monthly net profit or net loss.

Here’s the formula – Monthly Income – Monthly Expenses = Net Profit (or Net Loss)

 Take a moment to calculate.

What did you come up with? Fill out the following:

I know my monthly net income. It is: …………………….


I know my monthly net loss. It is: …………………….

Whatever the results of this process, don’t do anything yet … especially if you have calculated a monthly net loss. By the end of the next lesson, Become Your Own Financial Planner, you will have tools for a new perspective on how to approach a net loss situation. If you have a monthly net profit figure, the same tools will help you to improve it even more.

For The Week.

I know this was a big week. Congratulate yourself for your persistence and perseverance! Remember to do at least one nice thing for you this week.

Rewarding yourself is key to creating new, positive habits that will lead to your financial independence! Now that you have all your numbers, we can play around with them over the next few weeks. Clarity is power.

Once you are clear about where you are (which is the work you have done in the last 2 weeks) and where you want to go, only then will you have the power to take wise actions that will lead you to your desired destination. In the next lesson we’ll be getting into the subject of how to make the most of your money and how to avoid letting money leak out.

So until then, have a great week!

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