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What is Residual IncomeAt its simplest level, residual income is the income earned after each of the invoices and expenses are paid.For the average employee, this could be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do exactly what they want.In the corporate world, the definition is a bit 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 could be part of their charge to function 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 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 ultimate residual income model means youve got to create something of worth up front, that people will continue to cover for.Writers do this with books.
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They set 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 moves away from trading our time for money. It puts 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 actually spend his day to day hours working on all these businesses, but he still earns income from them. If the companies do well, he does well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income like check this site out 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 that pays dividends, and each month or quarter, he gets paid.The more stocks you purchase, the bigger that residual income becomes more. To the point where Warren Buffett earns roughly $62 million dollars per 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 choice passive residual income example.Steve has built an ebook empire that brings in 5-figures per month from 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 ebook, or produce a new product that people are looking for. Then give people the ability to download it while you get Related Site paid to sleep.This way, the item only needs to be built once. After the first cycle, we remove the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first cycle would look like this:But after the initial cycle, then write ebook is eliminated.
With each dollar spent, you earn a point that can build into a level at which you can buy products, or even have a trip.This isnt perfect for building an income snowball, but this really is the greatest lead to residual income so my website 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 compose an ebook.Whatever youre teaching is currently in demand, which means there are different people around who want to know too.Sit down and write an ebook.