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What's 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 would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do 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 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 would be a portion of the charge to function 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 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 value, 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 sell it the remainder of their lives to produce 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 places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there's someone who is earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on each of those businesses, but he still earns income from them. When 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 of his investments.By sticking mainly to dividend paying stocks, Mr.
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He buys a share of a stock that pays dividends, and every month or quarter, he gets paid.The more stocks you purchase, the bigger that residual income becomes more. To the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are just two owners of Look At This massive companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures per month from ebook sales.Hes capable to write them quickly on subjects that people are looking for.
To earn more money, youd need to keep creating more paintings.To begin earning passive residual income, you need to find something that can be duplicated. One that doesnt need to be built every time.The internet has made earning residual income so substantially easier.Digital products are the easiest type of earnings.
No manufacturing that needs to take place.Design some applications, 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 manner, the item only needs to be built once. After the initial cycle, we remove the create painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first cycle could look like this:But after the initial cycle, write ebook is eliminated.
With each dollar spent, you earn a point which can build into a level where you can buy goods, or even take a trip.This isnt perfect 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 covered this one a little already.If youve acquired some knowledge that you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are different folks around who want to know too.Sit down and write an ebook.