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What is Residual IncomeAt its most basic 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 get exactly 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 (expense of operating assets * cost of capital)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 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 would be a portion of the cost to function asset.Corporate America considers time as part of their bills paid before theyre paid.Combining both, we get a formula for passive residual income which 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 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 create something of worth up front, that people will continue to cover for.Writers do so with books.
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They record 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 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 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 each of these businesses, but he still earns income from them. If the companies do well, he can well.Warren Buffett is another shining example. Hes created Berkshire Hathaway that brings in income like 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 buys a share of a stock which pays dividends, and every month or quarter, he gets paid.The more shares you buy, the larger that residual income becomes more. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those 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 empire that brings in 5-figures per month out of ebook sales.Hes capable to write my site them fast on subjects people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a product that we are looking for. Then give individuals the ability to download it while you get paid to sleep.This manner, the item only needs to be built once. Following the first cycle, we eliminate the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle could look like this:However after the first cycle, then write ebook is removed.
With every dollar spent, you earn a point that can build to a level where you can purchase goods, or even have a trip.This isnt ideal for building an income snowball, but this really is the greatest 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 about, it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are other folks around who want to know too.Sit down and write an ebook.