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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 typical worker, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do what they want.In the corporate world, the definition is somewhat different.
You can 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 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 out of it so youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.
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Our time is worth something and we shouldnt discount it.For a normal 9 to 5 job, thats what were paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of their charge to function 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 this: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 worth , up front, that people will continue to pay for.Writers do this with books.
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.
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The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of these 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 such as Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mostly to dividend paying stocks, Mr.
He buys a share of a stock which pays dividends, and each month or quarter, he receives paid.The more stocks you purchase, the bigger that residual income becomes. On the point where Warren Buffett earns 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 assembled an ebook empire that brings in 5-figures a month out of ebook sales.Hes able to write them quickly on subjects that people are looking for.
To earn more money, youd need to keep creating more paintings.To begin earning passive residual income, you need to find a product which can be replicated. One that doesnt have to be constructed every time.The internet has made earning residual income so much easier.Digital products are the simplest type of earnings.
No manufacturing that needs to take place.Design some applications, write an ebook, or produce a product that we are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, the item only needs to be built once. After 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 initial cycle could look like this:But after the first cycle, then write ebook is eliminated.
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With every dollar spent, you earn a point which can build into a level where you can buy goods, or even have a trip.This isnt perfect for building an income snowball, but this really is the greatest guide to residual income so weve got to cover our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite read this post here 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 write an ebook.Whatever youre teaching is already in demand, which means there are other folks out there who want to know too.Sit down and write an ebook.