In personal finance, residual income is calculated by subtracting your monthly expenses from your monthly income. The residual income formula is as follows:
Monthly income – Monthly expenses = Residual income
For example, if you earn a salary of $5,000 and your monthly payments like loan repayment, utility bills, and groceries are $1,500, $200, and $500, then your residual income is:
5,000 – (1,500 + $200 + 500) = $2,800