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What is Residual IncomeAt its simplest level, residual income is the income earned after all the bills and expenses are paid.For the average 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 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 capital)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 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 part of the charge to function asset.Corporate America considers time as a portion of their bills paid before theyre paid.Combining the two, 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 create something of valueup front, that people will continue to pay for.Writers do this with books.
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They record a song and then can sell 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 on creating value for others.Residual Income ExamplesName any musician or author and there's someone who's earning residual passive income.
The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt visit actually spend his day daily hours working on each of those businesses, but he 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 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 purchases a share of a stock that pays dividends, and each month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are two owners of massive companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures per month out of ebook sales.Hes able to compose them quickly on topics that people are looking for.
No manufacturing that needs to take place.Design a few applications, write an official website ebook, or create a product that people are looking for. Then give individuals the capacity to download it while you get paid to sleep.This manner, the product only needs to be built once. After the initial cycle, we remove the create painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle could look like this:But after the first cycle, write ebook is removed.
With every dollar spent, you earn a point that can build into a level at which you can purchase goods, or even have a trip.This isnt perfect for building an income snowball, but this is the ultimate guide to residual income so weve must pay all 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 acquired some knowledge that you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is already in demand, which means there are different people out there who want to know too.Sit down and write an ebook.