continue to grow and pay not only him, but his heirs upon his death. What a
financial planning tool!
Let’s put a pen to this and utilize some financial planning concepts to
put the picture into its proper perspective. Let’s look at the concept of asset
equivalency. What would be the equivalent cash asset needed to replace a reli-
able, continuing cash flow generated as a result of residual income from a net-
work marketing enterprise? First of all, we must accept the premise that this
type of residual income can be stated as if it were the return on a cash asset.
For our illustration, we are going to assume a very safe investment equivalent:
a bank certificate of deposit or (CD), in this case, one that yields a better than
average return of 3 percent. Treat the following illustration in this manner: A
benefactor has given you a lump sum of money and has required that it be
placed in a CD. This enables you to receive the income for life and your heirs
will continue to do so thereafter, provided you do not touch the principal.
Let’s assume you have joined a network marketing company that offers
a true residual income opportunity. You have studied well and worked hard.
It is now one year into the effort and you have built a $2,500 per month
residual income. From a planning view, you have created a personal asset pos-
sessing a net worth of $1 million. Assuming a 3 percent yield on your money,
3 percent of $1 million equals $30,000 per year, or $2,500 per month. Yes,
you are now a millionaire!
But you are not ready to quit yet. Let’s see what can happen with a bit
more effort if you continue to do exactly what you were doing that got you to
where you are. You are working and getting others to work in a compensa-
tion plan that has rewarded you with this income. Over the next 12 months,
you do not work any harder and you do not work any smarter, but at the end
of this time your monthly residual income is now $5,000 per month. That’s
right, you now have the equivalent of $2 million in the bank, and are earning
as if your $2 million was generating 3 percent.
I think that you have the picture. Without working harder or smarter,
each year your net worth increases by $1 million and your income by
$30,000. You may decide to work harder or smarter, but it is also acceptable
to go and spend your remaining days on the beach, as long as you have devel-
oped leaders who will continue to support their organizations. Your income
should continue to grow, as will your net worth. One of the beautiful aspects
of this scenario is the benefit that your heirs will receive upon your death. The
income should continue and pass on to your heirs without serious erosion
from the effects of estate or inheritance taxes.
There are a number of important factors to put into place to make sure
that the income you have built is residual. Most network marketing busi-
nesses have the element of helping and caring for others. It is critical that you
become a product of your products, that you truly care about what you are
doing, that you support your customers ethically, and that you empower your
The Magic of Network Marketing: Building Real Residual Income 145