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What's Residual IncomeAt its simplest level, residual income is the income earned after all the bills 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 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 funds )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 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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of their cost to function asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining both, we get a formula for passive residual income which would seem 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 ultimate residual income model means youve got to create something of value, up front, that people will continue to pay for.Writers do so with books.
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They record a song and then can market it the remainder of their lives to make residual income.Their time working following 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 is someone who is earning residual passive income.
The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt our website really spend his day to day hours working on each of those 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 his investments.By sticking mostly to dividend paying stocks, Mr.
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He buys a share of a stock that pays dividends, and every month or quarter, he gets paid.The more shares you buy, the larger that residual income becomes more. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now those are just two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings look here in 5-figures a month out of ebook sales.Hes capable to compose them fast on subjects that people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or create a product that people are looking for. Then give people the ability to download it while you get paid to sleep.This way, the product only needs to be built once. After the first cycle, we remove the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first cycle would look like this:But after the initial cycle, write ebook is removed.
With every dollar spent, you earn a point which can build into a level where you can purchase products, or even take a trip.This isnt ideal for building an income snowball, but that is the ultimate lead to residual income so weve must 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 check that youve acquired some knowledge that you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is currently in demand, which means there are other folks around who want to know too.Sit down and write an ebook.