All of us hear the term from different people and read about it in different articles but do we really understand what ‘Residual Income’ really is and the effect it has on our wealth and standard of living.
A definition of ‘Residual Income’ provided by Investopedia states:
“Residual Income – The amount of income that an individual has after all personal debts, including the mortgage, have been paid. This calculation is usually made on a monthly basis, after the monthly bills and debts are paid. Also, when a mortgage has been paid off in its entirety, the income that the individual had been putting toward the mortgage becomes residual income”.
According to this definition your ‘Residual Income’ is the money left over every month after all your bills and debts have been paid and your mortgage is completely paid off. Period.
The money left over after you pay all your taxes, rent or mortgage, credit card bills, Lines of Credit, your heat and hydro bills, phone bills, grocery bills, gym membership, student loans, car payments, plus any other monthly bill you may have. This is the money you have for personal enjoyment, investment and philanthropy. This is your ‘Residual Income’. This is your wealth. This is your standard of living.
Take a few minutes to work this out. Think about it. What do you really have at the end of each month that you can call ‘Residual Income’? What is your wealth? What is your standard of living?
Like most people today, we find ourselves living from paycheck to paycheck and using Credit Cards and Lines of Credit, carrying huge debt and large mortgages that are 20 or 30 years long with little left over we can call ‘Residual Income’.
But it doesn’t always have to be like this.
What we most need and are lacking today is an opportunity and the guidance to help us establish a plan as to where we are today and where we need to go tomorrow to reach or exceed our ‘Residual Income’ goals, increase our wealth and improve our standard of living.
Once a plan is established and an opportunity is being worked, many people begin to realize that even a small increase in their ‘Residual Income’ establishes a long term substantial increase in their wealth and standard of living.
In today’s world it is imperative that all of us establish a ‘Residual Income’ plan and be diligently working that plan to help us ensure our wealth and standard of living is maintained well into our future.