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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the invoices and expenses are paid.For the average worker, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to get exactly 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 (expense 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time could be a portion of the cost to function asset.Corporate America considers time as part of the invoices paid before theyre paid.Combining both, we get a formula for passive residual income that would seem like this:Residual Income Net Income (Time Working + Expenses)By getting the time working down to zero and also the expenses as low as possible, were left with: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 valueup front, that people will continue to pay for.Writers do so with books.
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They record a song and then are able to market 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 goes away from trading our time for money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there's someone who is earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of these businesses, but he 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 such as 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 of a stock that pays dividends, and each month or quarter, he receives paid.The more shares you purchase, the larger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are two owners of massive companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures a month out of ebook sales.Hes able to write them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a new product that people are looking for. Then give people the capacity to download it while you get paid to sleep.This way, the item only needs to be built once. After the initial cycle, we remove the make painting and are going back and forth between market painting why not check here and earn money.In the example of an ebook, the initial cycle would look like this:However after the initial cycle, write ebook is eliminated.
With each dollar spent, you earn a point which can build to a level where you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but that really is the ultimate lead 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 covered this one a little already.If youve got some knowledge which you find yourself teaching friends and family around, and its time to compose an ebook.Whatever youre teaching is already in demand, which means that there are other people around who want to know too.Sit down and write an ebook.