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What is Residual IncomeAt its most basic level, residual income is the income earned after all the bills and expenses are paid.For the typical employee, this could be their disposable income. Theyve gotten their own 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 (cost of operating assets * cost of capital)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 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 exactly what were compensated 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 part of the bills paid before theyre paid.Combining the two, we get a formula for passive residual income which 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 eventual residual income model means youve got to make something of worth , up front, people will continue to pay for.Writers do so with books.
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They record a song and then are able to market 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 author and there's someone who's earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, record 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 made Berkshire Hathaway that brings in income such as 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 buys a share of a stock which pays dividends, and each month or quarter, he gets paid.The more stocks you buy, the bigger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures a month from ebook sales.Hes able to write them fast on subjects people are looking for.
No manufacturing that needs to learn the facts here now take place.Design a few applications, write an ebook, or create a new product that we are looking for. Then give people the ability to download it while you get paid to sleep.This way, the item only needs to be built once. Following the first cycle, we eliminate why not find out more 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: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 purchase products, or even have a trip.This isnt ideal for building an income snowball, but that really is the greatest lead to residual income so weve must pay all 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 acquired some knowledge that you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are other folks out there who want to know too.Sit down and write an ebook.