Residual income is the money that gets generated after a sale has been made. For example, if you sell an eBook online for $20, you will get paid that$20 right away. However, if you have a residual income from that sale, it means the person who bought your book will continue to make payments every month until they finish reading it or decide to cancel their subscription.

## What is residual income? – Definition

Residual income is the amount of money you have left over after your bills are paid. It’s the money that you make after all the expenses are covered, and it can be a powerful tool for building wealth.

If you want to know how much residual income you’re making, simply subtract your monthly expenses from your monthly income. A good rule of thumb is that the higher this number is, the better off you are financial.

## How to calculate residual income using the residual income formula?

Residual income is the amount of money you would receive if you sold your business. It’s often calculated as the net profit of a company minus any interest, taxes, and depreciation expenses.

However, there are other ways to calculate residual income. For example, if you were to sell an asset (like stock) on the secondary market that has appreciated in value since its acquisition by an investor or company, this appreciation might be considered “residual” because it’s “leftover” from earlier investments made into building up assets such as factories or property that are now worth more than when they were first acquired by investors/companies who own them now.

\text {Residual income} = \text {Net income} - \text {Equit charge}

## The importance of residual income

Let’s start by talking about what residual income is. In simple terms, it’s the difference between your total monthly income and your total monthly expenses. The more money you have coming in each month, the greater your residual income.

Residual income differs from active income in that it is not dependent on constantly working to generate new revenue streams or clients—you only need to work once and then continue making money off of the initial investment (or an investment portfolio). This is one of the best ways to ensure that you’ll never run out of money or fall into debt again!

If you want an extra boost in savings potential, look into investing your residual earnings into an asset like real estate with a fixed rate mortgage loan or real estate investment trust (REITs). This will allow you to build wealth over time while using your regular paycheck as collateral against any future financial emergencies—like unexpected medical bills or costly car repairs—that may come up unexpectedly.

## FAQ

### What is meant by residual income?

Residual income is income that one continues to receive after the completion of the income-producing work.

### Are residuals considered income?

Stocks that pay residuals or dividends are a form of passive income.

### What is ROI?

ROI gives companies a means to compare the effectiveness and profitability of any number of investments.