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What is Residual IncomeAt its simplest level, residual income is the income earned after all the invoices and expenses are paid.For the typical worker, 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 can call this passive residual income.Residual Income FormulaFor corporate America, the formula looks like this:Residual Income net operating income (expense of operating assets * cost 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 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 compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of their charge to operate 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 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 ultimate residual income model means youve got to make something of valueup front, that people will continue to pay for.Writers do this with books.
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They set a song and then can sell it the remainder of their lives to make residual income.Their time working after the initial investment has gone to zero.The ultimate passive residual income model moves away from trading our time for money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who is earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day hours working on each of those businesses, but he earns income from them. When the companies do well, he can well.Warren Buffett is another shining example. Hes created Berkshire Hathaway that brings in income such as Richard Branson, but Buffett also earns look these up passive residual income from all his investments.By sticking mostly to dividend paying stocks, Mr.
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He purchases a share of a stock that pays dividends, and every month or quarter, he receives paid.The more shares you purchase, the bigger that residual income becomes. On the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are just two owners of enormous companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings in 5-figures per month out of ebook sales.Hes able to compose them fast on subjects people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This over here manner, the product only needs to be built once. Following the initial cycle, we eliminate the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the initial cycle would look like this:But after the initial cycle, write ebook is removed.
With each dollar spent, you earn a point that can build to a level at which you can buy products, or even have a trip.This isnt ideal for building an income snowball, but this is the greatest lead to residual income so weve must pay our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a bit already.If youve got some knowledge that you find yourself teaching friends and family around, and it's great site time to write an ebook.Whatever youre teaching is currently in demand, which means that there are different people around who want to know too.Sit down and write an ebook.