The typical definition of net-profit according to modern accounting is revenues that gets paid out to shareholders as dividends (cash payments, as opposed to salaries) after subtracting monies needed for running, maintaining, and growing the business such as expenses, investments, cash reserves, etc.. For the sake of commonality and popular perception, Real Inc. states that it donates 100% of its net-profit to charity (its only shareholder receives a salary, as opposed to dividends). However, when it comes to determining if an operation is Real Economics certified, Real Economics takes an uncommon, yet necessary approach.

This approach involves the innovation  of a new accounting metric: Real Economics net-profit or real net-profit for short. Real net-profit is defined simply as that which is not needed by those who have it (e.g. money), with need being defined as that which provides for one's wellbeing.

We define wellbeing as being healthy, including happy, excluding any unhealthy means towards that happiness.

Included in one's wellbeing is the wellbeing of one's family as well. A branch doesn't go without the rest of the tree. However trees can also be grafted, and therefore what one considers family is not necessarily biological. As well, it must be considered that the wellbeing of one's biological family could unfortunately harm one's own wellbeing if one's family members are abusive. Depending on the circumstances, one's wellbeing may also include the wellbeing of one's immediate community as well. The idea is that whoever provides wellbeing for a person is included in the wellbeing of that person.

Included in wellbeing is also what one needs for investments, whether for the sake of realizing one's purpose / meaning, bringing betterment to the world / expanding the economy, or simply for the sake of personal return on investments.

Providing wellbeing to others, does not mean eliminating one's own wellbeing in the process. If a person does not have their wellbeing, they can not bring it to others either. One can reason that they could sacrifice their own wellbeing, adding themselves to the list of those who don't have it, in order to check off more from the list than they are adding to it. However, the reality is, that while that may be a productive sacrifice in the short-term, that person will be even more productive in the long-term by not ending their ability to provide wellbeing to others by sacrificing their own. Rather, by maintaining a continuity of one's wellbeing, one continually allows themselves the ability to provide it to others.

In a sense, one must be selfish before they can be selfless. Selfish, however, to the extent that one establishes their wellbeing, and not more, for anything more than one's wellbeing is ultimately taking away from that wellbeing to begin with.

It is important to note, that while wellbeing may be defined along objective parameters as stated above, within those parameters however, wellbeing is entirely subjectively defined. What is one person's necessity may be another person's want. Some may suffice with bare essentials while some may require certain luxuries. It is up to each individual to be honest in determining what they need and do not need.

Where real net-profit plays a significant role is that it is used to determine the first requirement of Real Economics. This requirement does not state that people give 100% of their net-profit, but rather 100% of their real net-profit, and this has a few implications.

For one, it means that unlike net-profit, a business owner could give himself no salary and take only dividends (cash) from his business. and while general accounting standards counts that as 100% net-profit to the owner, as long as the owner donates 100% of what he doesn't need to charity, Real Economics counts that as 100% of real net-profit donated to charity. As we'll see, this is what counts.

A practical reason Real Economics took this route, is that if Real Economics required 100% of net-profit to be donated, business owners could only receive an income from salaries, yet salaries are taxed at a relatively high rate, where as dividends are generally taxed at more favorable rates.

Real Economics encourages business owners to give to charity, and higher taxes may not only discourage business owners from giving to charity but may also greatly impede on their ability to generate wealth which in turn can impede on donations that could have been made from that wealth.

Real net-profit is not just a more reasonable way to define net-profit, it is also entirely aligned with the basic idea of profit in general. Profit is simply getting more out of what you put in. This is how wealth is gathered, and Real Economics simply requires that we give from what we gather, what we don't need. Why we call it real net-profit instead of just profit, is because real net-profit is a correction of net-profit itself. We established the metric real net-profit to begin with, because it is a more accurate indicator of what net-profit really is: the income taken by shareholders, regardless of it being taken as salary or dividends, minus what the shareholder needs from that income for their wellbeing.

As such, what matters is not how much of one's net-profit is donated to charity but rather how much of one's real net-profit is donated to charity. According to basic accounting principles, a salary that a business owner pays themself is not counted as the business owner's net-profit. That means that a business owner can claim that they are donating 100% of their net-profit to charity, but are really transferring what they would have taken as net-profit, to a salary instead. This entirely undervalues the statement "100% of net-profit donated to charity."

However, business owners generally do not take billion-dollar salaries, but they do make billions from their net-profits. This might then seem that it would be better to require business owners to give their net-profit instead of real net-profit, but what cannot go amiss is that billions can produce more billions for the economy as a whole through their being invested. That means that Real Economics would be hindering economic expansion if it would require 100% of net-profit to be donated.

So how then does Real Economics measure if one is donating 100% of their real net-profit? We don't. It is ultimately up to each individual to decide what their cost of wellbeing is, and to simply donate the rest. While the most important requirement of Real Economics by far, is Net Charity, it is the only one that cannot be measured by anyone but by one's self.

Above we wrote, "In a sense, one must be selfish before they can be selfless. Selfish, however, to the extent that one establishes their wellbeing, and not more, for anything more than one's wellbeing is ultimately taking away from that wellbeing to begin with." When charitable giving is executed in this manner, it's not just a kindness to the recipient of the donation, it's also a kindness to the donor himself. The belongings one bears is as contents carried in a net. Some have bigger nets than others, but regardless of the net's size, when the net is too heavy, it ceases being a trap for what it holds, and becomes the trap for he who holds it.

See the "Why give what I earned?" section of the What Is Real Economics? page, for more on the topic of how giving (what holds one down), sets one free.