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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 average worker, this could be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to get exactly what they want.In the corporate world, the definition is somewhat 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 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 the charge 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 look 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 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 pay for.Writers do this with books.
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They record a song and then are able to sell it the remainder of their lives to make 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's someone who's earning residual passive income.
The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all these businesses, but he still 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 like 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 buys a share of a stock which pays dividends, and each month or quarter, he gets paid.The more shares you purchase, the bigger that residual income becomes more. 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 small guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook empire that brings in 5-figures a month out of ebook sales.Hes capable to compose them fast on topics that people are looking web link for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create 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 initial cycle, we eliminate the make painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the first cycle could look like this:However after the initial cycle, write ebook is removed.
With every dollar spent, you earn a point that can build to a level at which you can buy products, or even have a trip.This isnt perfect for building an income snowball, but this is the greatest lead to residual income so weve got to cover our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an why not find out more EbookWeve covered this one a little already.If youve acquired 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 there are different folks out basics there who want to know too.Sit down and write an ebook.