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What's Residual IncomeAt its most basic 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 can 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 from it so youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.
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Our time is worth something and we shouldnt discount it.For a normal 9 to 5 job, thats exactly what were paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of their cost 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 that would seem 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.
They record a song and then can sell it the rest of their lives to make 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 author and there is someone who is earning residual passive income.
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The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all these businesses, but he still 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 mainly to dividend paying stocks, Mr.
He purchases a share of a stock which pays dividends, and each month or quarter, he gets paid.The more stocks you buy, the larger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now those are just two owners of massive 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 per month out of ebook sales.Hes capable to compose them quickly on topics people are looking for.
To earn more money, youd need to keep creating more paintings.To start earning passive residual income, you need to find something that can be replicated. One that doesnt need to be built every time.The internet has made earning residual income so much easier.Digital goods are the easiest form of earnings.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that we are looking for. Then give people the capacity to download it while you get paid to sleep.This manner, the product only needs to be built once. After the initial cycle, we eliminate the make 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 removed.
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With each dollar spent, you earn a point that can build to a level where you can purchase goods, or even take a trip.This isnt ideal for building an income snowball, but this really is the ultimate 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 which you find yourself teaching friends published here and family around, and its time to write an ebook.Whatever youre teaching is already in demand, which means that there are different people out there who want to know too.Sit down and write an ebook.