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What is Residual IncomeAt its simplest level, residual income is the income earned after all the invoices and expenses are paid.For the typical worker, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do 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 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 would be a portion of the charge to operate asset.Corporate America considers time as a portion of the invoices 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 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 cover for.Writers do this with books.
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They set a song and then can market it the remainder of their lives to produce 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 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, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all those businesses, but he 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 such as Richard Branson, but Buffett also earns passive residual income from all 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 every month or quarter, he gets paid.The more shares you purchase, the larger 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 two owners of massive companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings in 5-figures a month out of ebook sales.Hes capable to write them fast on topics people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or create a product that we are looking for. Then give people the capacity to download it while you get paid to sleep.This manner, 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 initial cycle could look like this:However after the first cycle, write ebook is eliminated.
With every dollar spent, you earn a point which can build to a level at which you can purchase goods, or even have a trip.This isnt ideal for building an income snowball, but this really is the greatest lead to residual income so weve must pay our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit 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 look at here now in demand, which means there are different folks around who want to know too.Sit down and write an ebook.