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What is 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 would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do exactly what they want.In the corporate world, the definition is a bit 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 * cost of funds )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 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 compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of their cost to function asset.Corporate America considers time as part of the bills paid before theyre paid.Combining both, we get a formula for passive residual income which would seem 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 create 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 market it the rest 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 is someone who's earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, listing labeland on review and on.Mr. Branson doesnt actually spend his day daily hours working on all these businesses, but he earns income from them. When the companies do well, he does 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 his investments.By sticking mostly to dividend paying stocks, Mr.
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He purchases a share of a stock which pays dividends, and every month or quarter, he gets paid.The more shares you buy, the larger that residual income becomes more. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive 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 built an ebook empire that brings in 5-figures per month from ebook sales.Hes capable to compose them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, blog here or produce a product that we are looking for. Then give people the capacity to download it while you get paid to sleep.This way, the product only needs to be built once. Following the first 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 initial cycle would look like this:However after the initial cycle, then write ebook is removed.
With every dollar spent, you earn a point that can build to a level at which you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but that is the ultimate lead to residual income so weve got to pay our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve acquired some knowledge that you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is already in demand, which means there are other people out there who want to know too.Sit down and write an ebook.