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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 average worker, this could be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do 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 (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 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 part of their cost to operate asset.Corporate America considers time as a portion of the bills paid before theyre paid.Combining the two, we get a formula for passive residual income that would seem 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 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 rest of their lives to make residual income.Their time working following the initial investment has gone to zero.The ultimate passive residual income model moves away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there is someone who's 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 those businesses, but he still earns income from them. When the companies do well, he does well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income like 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 which pays dividends, and each month or quarter, he gets paid.The more stocks you purchase, the bigger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are just two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual web 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 subjects people are looking for.
No manufacturing that needs to take place.Design pop over to these guys some 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 way, the item only needs to be built once. After the first cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle would look like this:However after the initial cycle, write ebook is eliminated.
With each dollar spent, you earn a point which can build into a level at which you can buy goods, or even take a trip.This isnt ideal for building an income snowball, but this is the greatest lead to residual income so weve got to pay all our bases.Speaking of illustrations, 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 around, and its time to compose an ebook.Whatever youre teaching is already in demand, which means that there are other folks out there who want to know too.Sit down and write an ebook.