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What's Residual IncomeAt its most basic level, residual income is the income earned after all the invoices and expenses are paid.For the typical employee, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do exactly 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 (cost 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 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 would be a portion of their charge to function asset.Corporate America considers time as a portion of the invoices paid before theyre paid.Combining both, we get a formula for passive residual income which would seem like this:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and also 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 make 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 sell it the remainder of their lives to produce 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 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 all those businesses, but he still 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 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 receives paid.The more stocks you purchase, the bigger that residual income becomes more. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a huge income snowball.Now those are just two owners of massive companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings Find Out More in 5-figures per month out of ebook sales.Hes capable to write them fast on subjects that people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or create Extra resources a new product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This manner, the product only needs to be built once. Following the first cycle, we remove the create 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:However after the first cycle, then write ebook is removed.
With each dollar spent, you earn a point which can build to a level where you can purchase products, or even take a trip.This isnt perfect for building an income snowball, but this really is the ultimate guide 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 got some knowledge that you find yourself teaching friends and family around, and its time to compose an ebook.Whatever youre teaching is currently in demand, which means there are different people out there who want to know too.Sit down and write an ebook.