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What is Residual IncomeAt its simplest level, residual income is the income earned after each of the bills 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 get 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 exactly what were paid for. Were trading time for money.In the corporate finance formula, our time would be part of the charge to operate asset.Corporate America considers time as part of their bills paid before theyre paid.Combining the two, 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 :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, people will continue to pay for.Writers do this with books.
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They set a song and then can market it the rest of their lives to produce residual income.Their time working following the initial investment has gone to zero.The ultimate passive residual income model goes away from trading our time for money. It places an emphasis investigate this site 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, cell phones, listing labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of these businesses, but he still 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 passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.
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He buys a share of a stock that pays dividends, and each month or quarter, he gets have a peek at these guys paid.The more shares you buy, the larger that residual income becomes more. On the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these 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 in 5-figures a month out of ebook sales.Hes capable to write them quickly on topics people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce 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 eliminate the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the first cycle would look like this:But after the first cycle, then write ebook is eliminated.
With each dollar spent, you earn a point that can build to a level at which you can buy products, or even useful content take a trip.This isnt perfect for building an income snowball, but that really is the greatest guide to residual income so weve got to pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit already.If youve got some knowledge which you find yourself teaching friends and family about, it's 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.