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What's Residual IncomeAt its simplest level, residual income is the income earned after each of the bills and expenses are paid.For the average employee, 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 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 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 part of the charge to operate asset.Corporate America considers time as part of their invoices paid before theyre paid.Combining both, we get a formula for passive residual income that would look like that: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 ultimate residual income model means youve got to create something of worth , up front, that people will continue to pay for.Writers do so with books.
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They set a song and then can sell it the remainder of their lives to make residual income.Their time working after the initial investment has gone into zero.The ultimate passive residual income model goes 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 is earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day hours working on each of those businesses, but he still earns income from them. When the i loved this 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 of 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 every month or quarter, he receives paid.The more shares you purchase, the bigger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars Look At This per 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 income example.Steve has built an ebook empire that brings in 5-figures a month out of ebook sales.Hes capable to compose them fast on subjects people are looking for.
No manufacturing that needs to take place.Design some applications, 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 manner, the product only needs to be built once. Following the first cycle, important link we remove the create 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:But after the initial cycle, write ebook is eliminated.
With each dollar spent, you earn a point which can build to a level at which you can buy products, or even have a trip.This isnt ideal for building an income snowball, but that 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 bit already.If youve acquired some knowledge which you find yourself teaching friends and family about, its time to write 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.