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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 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 (expense 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 take 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 part of the invoices 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 create something of value, up front, that people will continue to pay for.Writers do so with books.
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They set a song and then are able to market it the rest of their lives to produce residual income.Their time working after the initial investment has gone into zero.The ultimate passive residual income model moves away from trading our time for money. It places an emphasis why not look here 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 actually spend his day daily hours working on all those 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 like 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 purchases a share of a stock which pays dividends, and every month or quarter, he receives 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 huge income snowball.Now these are just two owners of enormous companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has built an ebook that brings in 5-figures a month out of ebook sales.Hes able to write them quickly on subjects people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or produce a new product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, look at this website the product only needs to be built once. Following the first cycle, try these out we eliminate the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle would look like this:But after the initial cycle, write ebook is removed.
With each dollar spent, you earn a point that 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 is the ultimate 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 little already.If youve acquired some knowledge that you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is already in demand, which means there are other folks around who want to know too.Sit down and write an ebook.