Our Finances » Profit & loss

A household “profit and loss” (P&L) statement compares money coming in to money going out. Our P&L reports six important numbers:

  1. Earned income:  Total compensation from working, including any employer benefits.
  2. Passive income:  Income obtained without labor (e.g. rental income, interest and dividends).
  3. Taxes:  Federal and state taxes, including payroll taxes.
  4. Giving:  Charitable donations.
  5. Spending:  Total household expenditure.
  6. Savings:  Sum of items 1 through 5, analogous to “net profit” in a business.

The table below shows our P&L for the past three years. Elsewhere, we disclose our P&L back to 2012. All figures are adjusted for inflation (2020 dollars). Note that a positive value for “Taxes” means tax credits exceed liabilities.

(1) Earned income$44,650$64,410$62,970
(2) Passive income$5,120$7,460$4,620
(3) Taxes$2,220-$3,410$1,870
(4) Giving-$2,690-$5,060-$6,960
(5) Spending-$33,805-$31,605-$27,700
(6) Savings$15,495$31,795$34,800

It helps to supplement our P&L with information on how much we travel. In “normal” years, we spend 30-40 days visiting family or on shorter camping trips. During “adventure” years, we take off for longer periods. In 2018, we went on a three-month road trip of the western parks. For 2021-2022, we are planning to spend 10 months traveling abroad.

Travel days1213436

For clarity and context:

  • Used properly, the U.S. tax code actually rewards frugality. In most years, we can create a highly-optimized tax situation that generates a net gain.
  • In years that we don’t travel extensively, we can easily save or give away 50% (or more) of after-tax income.
  • Since our mortgage principal is about $5k per year, the vast majority of our savings is liquid or “quasi-liquid” assets (e.g. retirement account contributions).
Next: Spending