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What's Residual IncomeAt its most basic level, residual income is the income earned after all the bills and expenses are paid.For the average employee, this could be their disposable income. Theyve gotten their own 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 (expense of operating assets * price 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 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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time would be part of their cost to operate asset.Corporate America considers time as a portion of their invoices 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 ultimate residual income model means youve got to make something of valueup front, people will continue to cover for.Writers do this with books.
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They set a song and then are able to sell it the rest of their lives to make residual income.Their time working after 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's earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day hours working on all those businesses, but he earns income from them. If the companies do well, he can well.Warren go to my site 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.
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He buys a share of a stock which pays dividends, and every month or quarter, he gets paid.The see this page more stocks you buy, the larger that residual income becomes more. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those are just two owners of enormous companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook empire that brings in 5-figures per month out of ebook sales.Hes able to write them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that people 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 initial cycle, we remove the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first cycle would look like this:However after the first cycle, then write ebook is eliminated.
With each dollar spent, you earn a point which can build into a level where you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but that really is the ultimate lead to residual income so weve must 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 around, and its time to compose an ebook.Whatever youre teaching is already in demand, which means that there are other folks out there who want to know too.Sit down and write an ebook.