Financial Planner Course The growth of the financial sector in India makes financial planning one of the fastest growing professions. The estimated demand of financial planners is around 50,000 CFP professionals in the banking and financial services industry in India. However, till May 2017, India has had only 1828 CFP professionals. CFP certification is recognised in […]
When fully consistent assumptions are used to forecast earnings, cash flow, dividends, book value, and residual income through a full set of pro forma (projected) financial statements, and the same required rate of return on equity is used as the discount rate, the same estimate of value should result from a residual income, dividend discount, or free cash flow valuation. In practice, however, analysts may find one model easier to apply and possibly arrive at different valuations using the different models.
So, if the goal is to have residual income when we retire, which seems based on Social Security rules to only be possible in our 60’s, and the government has mandated penalties before taking our money before 59.5, wouldn’t it be prudent to start investing in sources of residual income now that maybe don’t have an age limit into our 60’s? What guarantee do we have that we will make it that long?

Passive income is attractive because it frees up your time so you can focus on the things you actually enjoy. If a doctor wants to earn the same amount of money and enjoy the same lifestyle year after year, they must continue to work the same number of hours at the same pay rate—or more, to keep up with inflation. Although such a career can provide a very comfortable lifestyle, it requires far too much sacrifice unless you truly enjoy the daily grind of your chosen profession. Additionally, once you decide to retire, or find yourself unable to work any longer, your income will cease to exist unless you have some form of passive income.

A Risk Score of 10 means no risk. A Return Score of 1 means the returns are horrible compared to the risk-free rate. A Feasibility score of 10 means everybody can do it. A Liquidity Score of 1 means it’s very difficult to withdraw your money without a massive penalty. An Activity Score of 10 means you can kick back and do nothing to earn income. To make the ranking as realistic as possible, every score is relative to each other. Furthermore, the return criteria is based off trying to generate $10,000 a year in passive income.

Residual income is the amount of net income generated in excess of the minimum rate of return. Residual income concepts have been used in a number of contexts, including as a measurement of internal corporate performance whereby a company's management team evaluates the return generated relative to the company's minimum required return. Alternatively, in personal finance, residual income is the level of income that an individual has after the deduction of all personal debts and expenses have been paid.