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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the invoices and expenses are paid.For the typical 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 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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time would 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 which would look like that:Residual Income Net Income (Time Working + Expenses)By getting 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 can 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 goes away from trading our time for money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there is someone who's earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on each of these 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 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 each month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. On the point where Warren Buffett earns discover here about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now those are just two owners of massive companies, but what about the small guysSteve Scott is a prime 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 applications, write an ebook, or create a product that people are looking for. Then give individuals the capacity to download it while you get go to website paid to sleep.This way, the product only needs to be built once. Following the initial cycle, we remove the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle could look like this:However after the initial cycle, write ebook is removed.
With each dollar spent, you earn a point that can build into a level at which you can purchase goods, or even take a trip.This isnt ideal for building an income snowball, but this is the greatest lead to residual income so weve must pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit already.If youve got some knowledge which 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 that there are different people out there who want to know too.Sit down and write an ebook.