Managing My P&L Post

TLDR:

Getting back to my routes
Managing My Personal P&L
Tool: Hotjar

Stay Tuned: Next week we’ll be sharing first glance of the Top 100 Shopify Plus Apps report.

Back to my route - Craiglist

I’ve been selling some old stuff (monitors, headphones) I no longer use and its such a great callback to how I got into eCom. When I was a teenager I would sell video games, old TVs, drum kits on Craiglist. I’d sell my old stuff to make money for the new thing I wanted.

It was such a great proving ground in understanding how to sell something, busting buyer objections, and establishing trust between a buyer and a seller. I don’t know if my parents knew what I was doing at the time, but it was really the foundation for my experience now. It’s cool to try to sell a couple hundred dollars worth of stuff the same way I did back then.

We’re growing! I appreciate the 934 who has stayed subscribed and found this interesting. Amazing to see the newsletter grow by 30% since I’ve started it up again. If you know anyone who would appreciate this newsletter send it there way!

Now let’s get into the good stuff. How I run my family’s finances.

Let’s start with some context. US consumers have taken out $950bn in credit card loans in the last couple of years. Millennial’s specifically have over $3.8 TRILLION in total outstanding debt. Between inflation, all-time housing prices, and post stimulus spending levels a lot of average Americans are going to be in financial trouble in the coming months - years.

I think everyone has the opportunity to get ahead of this and stay out of as much financial trouble as possible. Here’s how I run our family finances and have been able to invest $164,498 and save an additional $30,282 over the past 2 years.

How I run my family's P&L.

I built a personal P&L for myself to track what my family makes, spends, investd and keeps on a monthly basis. It’s a tool to understand where we are headed and how we can be smarter about our money. It's one of the best decisions I've ever made in my life.

It's heavily inspired by Profit First by Mike Michalowicz where the goal is to see how much Net Income (Income - Expenses - Taxes) your business makes to get to the dollars you keep on a monthly basis. From there you can save, invest, go on vacation, make a big purchase. Basically whatever you want.

After I read it I had a 💡💡💡 moment. Why not run my personal finances like a business would. That’s exactly what I did. Twice a month I go through our bank and credit card statements to update all the info into a spreadsheet that builds my P&L for me.

Now this won’t operate as official financial documents or replace your tax returns, but you should think about it as a tool to have better insights into your finances.

Tool that Needs to be on your radar

We talked about it last week, but it’s worth coming back to the #2 most used Shopify Plus App. Hotjar

Want to know what your customers are thinking without asking them? It's a screen recording tool where you can watch what your users are doing in their sessions. It's anonymized data so you don't have to worry about privacy issues.

You can record what someone looks at, hovers their mouse over, clicks on, when they leave. If you are spending money to update your site this is the first tool I use before anything else. For <$100/mo it'll save you thousands in dev hours/budget + provide crucial insights into how your shoppers actually buy.

The quick overview on to use the P&L:

1. The P&L (Tab 1): Summary level info. You won't need to update anything here since the data feeds in from the other tabs.

   1. Income (What you make) is at the top, Followed by Expenses what you spend.

   2. Net Income will be Income - Expenses.

      1. If you aren’t a W2 employee always remember to withhold for taxes. Then update your Net Income equation to (Income - Expenses - Taxes) to see how much you keep.

   3. Profits (aka Savings) is currently set to 10% of Income, but change this number to match whatever makes the most sense for you personally. Once you update Row 12 it’ll tell you how much you should save based on the monthly income.

   4. Investments and Charitable Donations both pull in from your respective tabs to show what % of your Income are going to each category.

   5. Cash in the Bank: Is [Year start capital (P2) + Net Income - Savings - Investments - Charitable Donations] to show how much your cash positioned changed in the month and how much is left in the bank.

2. Income (Tab 2): Enter what you make each month in each row based on how many income streams you have. Sum them up by month (Column H2 -S2).

   1. We’re a dual income household with a couple of side hustle/income-generating investments so I’ve left a couple rows available. On pay day update how much you made for each item.

   2. I’ve broken out our “day job” income from side hustle investments as we only base our monthly expenses on our job income.

3. Expenses (Tab 3): Enter your expenses here. Sum them up by month (Column H2 -S2). I track and categorize every expense (Bank and CC statements) every 2 weeks to set and track our household budgets. It takes an hour every other week, but you can also just enter the monthly totals if you want.

4. Investments (Tab 4): Similar to Expenses enter each line item here and sum up the monthly amounts in Column H2 - S2. This will update your chart to track how much you are investing every month.

5. Charitable Donations (Tab 5): Exact same structure as Investments.

6. Projected Income (Tab 6): I use this as a worksheet to map out our future cash flows. It operates exactly the same as the Income tab, but isn’t linked to the other sheets. I simulate what I expect each income stream to perform for the year to understand what financial position we’ll be in.

   1. Candidly this has made me the most confident in major life decisions to get a grip on what adjustments we need to make to afford major life changes.

7. Expenses by Type (Tab 7): I like to create monthly budgets by category to track our actuals v. expectations. The Pivot table will automatically pull in all expenses by type from the Expenses Tab 2. Then sum them up for the year and show the percentage of our total spending by category.

   1. It’s incredibly helpful to see where the majority of our money actually goes. There’s something every year that doesn’t match our expectations.

   2. You'll need to update the Pivot table (Click edit on the report) to update the categories to your own.

The other slight update you'll find is in the P&L tab there's a fixed 10% for profit in relation to Income. This is the Profit First method where I transfer 10% of our income immediately into a savings account. You can set your own number here and it will update to how much you should save every month from your paychecks.

As the cash flows through your system you can see where the greatest amounts are staying or leaving. I don’t believe there’s a right or wrong here, but is a tool to track if you are hitting the goals you want based on the strategy you have.

With this template it's a 2-3 hrs/mo to maintain. 2 Saturdays (usually around the 15th and month end) I spend an hour updating each tab with the most recent info. The majority of that time is updating Expenses, because I want to get a granular idea of where our money is being spent.

At the end of every month my partner and I review the P&L. Track to see if our spending matches our expectations and adjust accordingly. It has changed our eating out habits, what we buy on groceries, and created a great process for us to communicate about how we spend our money. We catch issues quickly and don’t get surprised when we go over our budget on a given month.

It's been incredibly helpful mapping out large decisions, adjusting our spend based on lifestyle and gearing up for major purchases (Vacations, we recently moved, we have a wedding coming up this summer).

Despite Inflation running rampant, major life purchases, and our housing costs +25% compared to last year, I've never been more confident in our financial situation.

Hope you find this helpful and happy to answer any questions you have. This template is NOT meant to be used for taxes or investing, but to track where the money is flowing through your system. Everyone has their own rules they operate on. This tool allows you to calculate what's right for you.

🧠 The Takeaway

You should be tracking your personal P&L monthly to know what's happening between the money you make and the money you keep.

1. Update your income and expenses bi-monthly to have an updated view of your cash.

2. Track your Investments and Charity donations to know how much cash you have left over.

3. Always save some % of your income in a rainy day fund.

👷 What can you do about this?

1. Clone the copy and start doing this yourself. The hardest part is starting.

2. Get to a target percentage of your income for each stage and stick to those numbers. You can always adjust them as needed.

3. Take more control over your finances and make the best decisions you can for yourself and your family.

As always. Stay confident, connect with your customers, and keep crushing it.

Jeremy Horowitz

P.S. If you’d like to learn more check out some of our other resources:

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