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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 worker, this could be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to get 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 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 cost to function asset.Corporate America considers time as part of the invoices paid before theyre paid.Combining the two, we get a formula for passive residual income that would seem like that:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and the expenses as low as possible, were left :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 valueup front, people will continue to cover for.Writers do this with books.
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They set 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 to get 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 actually spend his day to day 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 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 mostly 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 receives paid.The more shares you purchase, the bigger that residual income becomes more. On 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 little guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings in 5-figures per month out of ebook sales.Hes capable to compose them fast on topics that people are looking for.
No manufacturing that needs to take place.Design some site link applications, write an ebook, or produce a new product that people are looking for. Then give individuals 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 remove the create painting and are going back and forth between sell painting and earn money.In the example of an ebook, the initial cycle could look like this:However after the initial cycle, then write ebook is eliminated.
With every dollar spent, you earn a point that can build into a level at which this link you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but that is the greatest guide to residual income so weve must pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered More about the author this one a bit already.If youve got some knowledge which 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 there are different folks around who want to know too.Sit down and write an ebook.