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What's Residual IncomeAt its simplest level, residual income is the income earned after each of the bills and expenses are paid.For the average worker, this would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do what they want.In the corporate world, the definition is somewhat 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 funds )For personal finance, the formula looks like this:Residual Income Net Income ExpensesSay you earn a check for $3,000. Taxes require a 500 chunk out of it so 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 paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of their charge to operate asset.Corporate America considers time as part of the bills paid before theyre paid.Combining both, we get a formula for passive residual income that would look like that:Residual Income Net Income (Time Working + Expenses)By getting 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 worth up front, that people will continue to cover for.Writers do so with books.
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They set a song and then are able to market it the rest of their lives to produce residual income.Their time working after the initial investment has gone to 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 is 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 all these businesses, but he earns income from them. If the companies do well, he does well.Warren Buffett is another shining example. Hes created Berkshire Hathaway that brings in income such as Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mostly to dividend paying stocks, Mr.
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He purchases a share of a stock which pays dividends, and every month or quarter, he gets paid.The more shares you purchase, the bigger 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 those 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 pop over to this site to compose them quickly on topics that people are looking for.
No manufacturing that needs to take place.Design some software, 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 manner, the item only needs to be built once. Following the first cycle, we remove the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle could look like this:However after the first cycle, write ebook is eliminated.
With each dollar spent, you earn a point that can build into a level at which you can buy products, or even have a trip.This isnt perfect for building an income snowball, but that is the ultimate discover this info here lead to residual income so weve must pay our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a bit already.If youve acquired some knowledge which you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is currently in demand, which means there are other folks out there who want to know too.Sit down and write an ebook.