# Residual Income: How To Calculate Your Residual Income

What is the right way for you to calculate your residual income?

The way you calculate your residual income is by attaching your target to its purpose. Each target should have its own real life purpose. Your targets and purposes may vary greatly from your neighbor. So you need to do this calculation on your own.

Targets + Purpose = Residual Income Success

Target is the amount of money you need.

Purpose is the reason you need that money.

Every time you hit your current target, and it fulfilled the purpose; you need to make a new target with a new purpose. Then rinse and repeat.

In general, the way you calculate your residual income targets and purposes are as follows.

First, you have to calculate how much residual income you need, in addition to what your already making.

For example, let’s assume your monthly bills are \$5,000 a month, and your monthly income is \$4,700 a month.

Your first target should be \$300 a month. This target should be tied to your purpose of covering your monthly expenses.

Second, you have to calculate how much more you need to cover all of your monthly expenses.

Your monthly expenses are \$5,000. You earn \$4,700 a month from your day job, but don’t forget, you now earn \$300 a month from your first target and purpose.

Your next target is to earn \$4,700 in residual income. Your purpose is to make enough residual income that you are now working your day job because you choose to, not because you have to. (this is a breath of fresh air, but DON’T QUIT yet)

Your third step to calculate your income needed (continuing with this example) is having your target set to earn \$5,000 more than what you are earning right now (residual.) Your purpose is to quit your day job and do whatever it is that you like to do.

The general rule here is – you are not allowed to quit your day job until your residual income is at least twice as much as your current monthly expenses. Once you’re earning at least double your monthly expenses for a minimum of 3 consecutive months, you now have permission to quit your day job (this is optional, and you should consult with the proper authorities before doing so).

This is generally a good place to stop. At this point you are now living twice the lifestyle you have been. However, you also just quit your day job; so why not keep going.

You can keep setting new targets and purposes forever if you like. If you wanted to make an additional \$500 a month as your next target, and your purposes could vary –