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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the bills and expenses are paid.For the typical worker, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to get 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 * price of capital)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 from 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 compensated for. Were trading time for money.In the corporate finance formula, our time could be a portion of the cost to function asset.Corporate America considers time as a portion of the invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which would look like this: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, that people will continue to cover for.Writers do this with books.
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They record a song and then are able to market it the rest of their lives to produce 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 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, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all those businesses, but he earns income from them. When 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 buys a share of a stock which pays dividends, and each month or quarter, he gets paid.The more stocks you buy, the larger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those are two owners of enormous 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 a month out of ebook sales.Hes capable to write them fast on subjects people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create 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 first 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, then write ebook is eliminated.
With every dollar spent, you earn a point that can build to a level where you can buy products, or even have a trip.This isnt ideal for building an income snowball, but that really is the greatest lead to residual income so weve got to pay our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit already.If youve acquired some knowledge which you find yourself teaching friends and family about, it's time to write an click here now 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.