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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the invoices and expenses are paid.For the average worker, this could be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to get what they want.In the corporate world, the definition is somewhat 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 require a $500 chunk from 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 compensated 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 part of the bills paid before theyre paid.Combining the two, we get a formula for passive residual income that would look like this:Residual Income Net Income (Time Working + Expenses)By getting the 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 eventual residual income model means youve got to create something of value, up front, that people will continue to pay for.Writers do this with books.
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They record 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 into 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 writer and there is someone who is earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on all those businesses, but he still earns income from them. When 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 purchases a share of a stock which pays dividends, and each 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 about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are just two owners of enormous companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has built 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 produce a new product that we 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 eliminate the make painting and are going back and forth between market 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 which 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 that really 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 little already.If youve acquired some knowledge our website which you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are different folks around who want to know too.Sit down and write an ebook.