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What's Residual IncomeAt its simplest 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 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 (expense of operating assets * price 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 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 could be a portion of their charge to operate asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining both, 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 also 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 make something of worth up front, that people will continue to pay for.Writers do this 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 into zero.The ultimate passive residual income model goes away from trading our time to get 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, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day hours working on each of these businesses, but he 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 like Richard Branson, but Buffett also earns passive residual income from all of 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 buy, the bigger that residual income becomes. To the read review point where Warren Buffett earns roughly $62 million dollars link per year on dividend payments. Thats a massive income snowball.Now those are two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has important link assembled an ebook empire that brings in 5-figures per month out of ebook sales.Hes able to write them fast on subjects that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, the product only needs to be built once. After the initial cycle, we eliminate the create 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:However after the initial cycle, then 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 ideal for building an income snowball, but that really is the ultimate guide 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 bit already.If youve got some knowledge that you find yourself teaching friends and family about, its time to write an ebook.Whatever youre teaching is already in demand, which means that there are different people around who want to know too.Sit down and write an ebook.