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What is Residual IncomeAt its simplest level, residual income is the income earned after each of 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 get 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 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time could be part of their charge to operate asset.Corporate America considers time as a portion of their 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 :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 make something of valueup front, that people will continue to cover for.Writers do this with books.
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They set a song and then can sell it the remainder 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 visit our website puts 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, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all these 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 like Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.
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He purchases a share of a stock that pays dividends, additional info and every month or quarter, he gets paid.The more shares you buy, the larger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now those are two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings in 5-figures a month from ebook sales.Hes capable to compose them fast on subjects people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or create a product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This way, the item only needs to be built once. After the first cycle, we remove the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle could look like this:However after the initial cycle, write ebook is removed.
With each dollar spent, you earn a point which can build to a level at which you can purchase products, or even take a trip.This isnt ideal for building an income snowball, but that is the greatest lead to residual income so weve got to pay all 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 it's time to compose an ebook.Whatever youre teaching is currently in demand, which means there are different people around who want to know too.Sit down and write an ebook.