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What is Residual IncomeAt its most basic level, residual income is the income earned after all the invoices 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 do what they want.In the corporate world, the definition is a bit 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 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 what were paid for. Were trading time for money.In the corporate finance formula, our time could be part 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 which would seem like this:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and also 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 ultimate residual income model means youve got to create something of value, up front, that people will continue to cover for.Writers do this with books.
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They record a song and then are able to 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 moves away from trading our time for money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there's someone who's earning residual passive discover this info here income.
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 each of content those businesses, but he still earns income from them. If the companies do well, he does 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 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 gets paid.The more stocks you buy, the larger that residual income becomes. On the point where Warren Buffett earns roughly $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 prime passive residual income example.Steve has built an ebook that brings in 5-figures a month out of ebook sales.Hes capable to compose them quickly on topics people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or produce a product that we 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 initial cycle, we eliminate the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle would look like this:However after the first cycle, write ebook is eliminated.
With every dollar spent, you earn a point which can build into a level at which you can buy products, or even take a trip.This isnt ideal for building an income snowball, but this really is the ultimate guide to residual income so weve got to cover our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve got some knowledge which you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is already in demand, which means there are different people out there who want to know too.Sit down and write an ebook.