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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the bills and expenses are paid.For the typical employee, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do what they want.In the corporate world, the definition is a bit different.
You could call this passive residual income.Residual Income FormulaFor corporate America, the formula looks like this:Residual Income net operating income (cost of operating assets * price of capital)For personal finance, the formula looks like this:Residual Income Net Income ExpensesSay you earn a check for $3,000. Taxes take a $500 chunk from it youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.
Our time is worth something and we shouldnt discount it.For a normal 9 to 5 job, thats exactly what were paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of their charge to function asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining the two, we get a formula for passive residual income that would look like that:Residual Income Net Income (Time Working + Expenses)By getting the time working down to zero and the expenses as low as possible, were left :Residual Income Net Incomeand the money is coming in without lifting a finger.The Residual Income ModelThe eventual residual income model means youve got to create something of value, up front, people will continue to pay for.Writers do this with books.
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They set a song and then are able to sell it the remainder of their lives to produce residual income.Their time working after the initial investment has gone into zero.The ultimate passive residual income model moves away from trading our time for money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who's earning residual passive income.
The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day to day hours working on all these businesses, but he still earns income from them. When the companies do well, he can well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income like Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mainly to dividend paying stocks, Mr.
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He buys a share here are the findings of a stock that pays dividends, and each month or quarter, he gets paid.The more stocks you purchase, the larger that residual income becomes more. On the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has built an ebook that brings in 5-figures a month from ebook sales.Hes able to compose them quickly on topics that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or produce a product that we are looking for. Then description give people the ability to download it while you get paid to sleep.This manner, the item only needs to be built once. After the initial cycle, we eliminate the make painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle would look like this:But after the first cycle, then write ebook is eliminated.
With each dollar spent, you earn a point that can build to a level at which you can purchase products, or even take a trip.This isnt ideal for building an income snowball, but that really is the greatest guide to residual income so weve got to cover our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve acquired some knowledge that you find yourself teaching friends and family about, its time to write an ebook.Whatever youre teaching is currently in demand, which means that there are different people out there who want to know too.Sit down and write an ebook.