# How to Calculate Residual Income – Passive Income Ideas #www.income #tax.com

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# How to Calculate Residual Income – Residual Income Model

How to calculate residual income for stay at home mom businesses requires a residual income model or residual income formula.

A network marketing compensation plan is the easiest way to see how residual income works for stay at home mom businesses.

Let’s examine how you get paid for the orders in your network marketing organization.

We will use the matrix provided on the How You Get Paid in MLM page as our residual income model.

Keep in mind, this is only an example, with a totally fictitious product and payout.

The point is not to be a true residual income formula, but more to show you how network marketing works, and what is possible with a residual income model.

Your results will vary completely based on what company you choose, how they are structured, and how much work you put in.

How to Calculate Residual Income

Let’s say your main product costs \$40.

Each month, every distributor pays \$40 to receive their product.

Of that \$40, let�s make \$20 the commission.

The commission breaks down as follows:
Level 1: 50% or \$10
Level 2: 5% or \$1
Level 3: 5% or \$1
Level 4: 5% or \$1
Level 5: 5% or \$1
Level 6: 5% or \$1
Level 7: 25% or \$5 bonus level (because this should be the largest level of your downline) So you would make half of the commission on the item, each month, by those on your first level. But wait! I hear you. You are thinking to yourself “Why should I give up half of my commission! I did all the work!”

Using the same example of recruiting three people personally, if you were to get 100% of the commission, you would earn \$60 each month. But, breaking the commission into 7 levels, assuming that each of the three people you enrolled enrolled three people of their own, who in turn enrolled three people, all the way through your 7 levels, you would earn the following:

-You-
Level 1: 3 people, \$10 each = \$30
Level 2: 9 people, \$1 each = \$9
Level 3: 27 people, \$1 each = \$27
Level 4: 81 people, \$1 each = \$81
Level 5: 243 people, \$1 each = \$243
Level 6: 729 people, \$1 each = \$729
Level 7: 2,187 people, \$5 each = \$10,935
Total in organization: 3,279, Total monthly income = \$12,054 Now that’s a far cry from \$60!

Again, keep in mind that this residual income formula is purely fictitious, with a made up compensation plan. Each company and product will vary on how to calculate residual income in order to stay a stay at home mom. But this residual income model is the general idea behind network marketing. Also, realize that the MLM compensation example above is a “Perfect-World Example”, that is, it will never happen.

You will sponsor many people who will claim they want to make money, and build a business, but will expect it to happen to them, instead of them making it happen.

Some of these people will blame the company, or even you, for their MLM failure. The truth is, they were not motivated to make a change in their lives at this time, or they did not have the education needed in order to do so.

But some people will go out and sponsor dozens, or even hundreds of others! And some of those they sponsor will do the same.

Do you know the 80/20 rule? 80% of the results are accomplished with 20% of the effort. This applies to multilevel marketing too. 80% of your organization will be built by 20% of your downline.

I hope this residual income model goes a long way towards furthering your understanding of how to calculate residual income and stay at home mom businesses in order to stay a stay at home mom.

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