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RITH/RITZ/REIH scores: Residual Income metrics/tools

 
steward
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This is one of those things where I need a tool to describe and compare stuff.


RITZ score - Residual Income Ten-Year Zero.

This is for "pure" residual income streams. Ten years will pass and you have literally put in not even one minute linking to it, polishing it, mentioning it ... anything. It is possible that once set in motion, the income will get smaller with each passing year. Or it might get bigger.

But the number given for this would be the total income over ten years.

So, my "ants and aphids" article has a RITZ score of 600.


RITH score - Residual Income Ten-Year / Hour.

It is probable that anything that has a RITZ score, has a higher RITH score.

You put in 60 minutes of effort, somewhere within ten years, and this is the resulting income.

This could be that spread out over ten years, you put in 60 minutes of effort and what the resulting score is. Or, this could be something where you have set something up so that for every hour you put in, you get some income back. Effect


REIH score - Residual Enhanced Income Hourly

This is something where you did something in the past to create a residual income stream, but you have to nudge it periodically. If you stop nudging it, the income stream stops. So this does not have a ten year component to it, but rather .... if it takes a monthly nudge that take four minutes, then with 60 minutes of effort you might get $2500. So your REIH score is 2500.

This could be that once every three years you have to get a reprint of a thing and spend 40 hours making calls and stuff .... and sending boxes to amazon. And then during the three years, you have spend about ten hours per year dealing with little issues. So, a total of 70 hours every three years, but you end up netting $30,000. So your REIH score is 428.

Maybe after an amazing book, you get flown around and get paid $10,000 per speaking gig. You spend a couple hours of prep, a couple hours speaking, about ten hours of "other", so your REIH score is about 700.

Maybe you have a web page that you got all set up and it has a RITZ score of 20,000. But if you put in 100 hours per year on polishing it, improving income streams for it, SEO, and sending attention to it, and whatever - you might take it from $2000 per year to $40,000 per year. So that's an REIH score of 400. But maybe you stop at some point and your RITZ score has gone from 20,000 to 200,000.



I just made this stuff up in a feeble attempt to be able to better discuss residual income streams.

 
paul wheaton
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Sooo ... maybe this isn't as profound as I thought it would be when I wrote it?
 
pollinator
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I like this.

I often find myself in discussions about how we make our money.

One book that I often refer to is The Cashflow Quadrant by Robert Kiyosaki (perhaps better known as the author of Rich Dad, Poor Dad.)

The premise of the book is that people get their money in one of four ways, which we can visualize like this:

E|B
S|I

Where E=employment, S=self-employment, B=Business ownership, and I=Investing

He doesn't pass MUCH judgement on any of the four quadrants, except to say that it is better to be on the right side than the left side.

It seems most people think of earning money in the E quadrant, i.e. get a job working for someone else. It is sort of the default model for our society. At first glance, people assume that it is the "safest" path, trading time for money.

After a series of utterly ridiculous circumstances, I discovered that I'm not cut out for traditional employment, so I became an S. (This was before I read the book).

As a self-employed person, I am my own boss. I've been working as a freelance language consultant for close to ten years, and it has been nice to have the flexibility to set my own hours, and in some cases, my own wages. After my son was born handicapped, it became quickly clear that working a standard 40 hour/week job would be impossible in light of all the additional medical needs, planned and unplanned.

But one of the biggest drawbacks to being an S is that when I stop working, the money stops flowing. I don't get paid vacation, I just get to choose when I want to take a break from earning. The effects of this are most often felt in the doldrums surrounding summer and Christmas, when my clients, earning from the E quadrant, take their paid vacations, leaving me with less work but no intention of taking a vacation.

More specifically to me, it also usually includes an hour commute to companies I don't align with philosophically, such as large chemical or pharmaceutical companies.

To offset some of these issues, I started doing media production in 2012. This is what I was trained in before moving to Europe, so it was a return to my first love, which had to be set aside temporarily while I had more pressing matters of learning a language, adapting to a culture, and finding a way to make money immediately while getting settled.

Business owners, on the other hand, own the process by which the money is made. Essentially, B people own the Cash Cow and pay a modest wage to E people to milk it. They can also pay themselves to milk it if they choose, or they can walk away. And the milk keeps flowing, with or without their input.

Investors use money to make more money. There's obviously more to it than that, but nothing I want to expand on here.


The only quadrants relevant to residual income are B and I, on the right side.

At the moment, I have two primary streams of income with which I have been earning for several years, but both are in the S quadrant.

However, in the second half of last year, I started renting out my studio space on airbnb, and I have to say that it's been a remarkable experience so far.

Now obviously, your mileage may vary, but my studio is unique, quite large, centrally located in a city that attracts people from all over the world due to its tourist charms as well as in connection with the university. I rent it out at a moderate price, and so far for 2016, I'm averaging a 40% booking rate and airbnb has almost matched my monthly income from what I earn as a freelancer.

All this in exchange for about an hour of cleaning and setting up, maybe 15 minutes of meeting new guests and handing over a key, and as much time as it takes me to shove towels and bedsheets into the washing machine, per reservation, which, for 2016 so far, has been 12, so average of 7.5 hours of work per month.

I suppose this isn't exactly residual income, but it certainly is significant income, with comparatively little input on my part. This feels like it fits squarely into the REIH model, unless there's something I'm missing.

I also have a few different "true" residual income streams in the works, but having had no experience with this model so far, I don't know what to expect until it happens. But as you say, try 100 things....
 
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I understand and like the concepts of RITZ and REIH, but I don't quite get RITH.

The last word is just "Effect" and it's hanging out by itself, not part of a sentence. Did the full explanation of RITH accidentally get cut off? Or is the full explanation still there and the concept is just going over my head? I am feeling rather "dense" this morning.

Would someone who does understand mind explaining it to me like I'm five?
 
paul wheaton
steward
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The idea with the RITH score is that you might need to put some small amount of maintenance in every few years. Maybe update the server or update the page or update the links. So, over 10 years it might bring in $10,000, but over that 10 years you might spend 4 hours maintaining the page in some way. So the score would be 2500.
 
Tyler Miller
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Oh, I get it now. Thanks for explaining that for me!
 
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