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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 average worker, 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 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 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 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 paid for. Were trading time for money.In the corporate finance formula, our time would be part of their charge to function asset.Corporate America considers time as part of the bills paid before theyre paid.Combining the two, we get a formula for passive residual income which 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 :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 worth , up front, that 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 remainder of their lives to produce 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 to get money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who is earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, listing labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of those businesses, but he earns income from them. When the companies do well, he does 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 of 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 every month or quarter, he gets paid.The more shares you buy, the bigger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are two owners of massive companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook that brings in 5-figures a month from ebook sales.Hes capable to write them fast on topics that people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a new product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This way, the product only needs to be built once. Following the first cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle could look like this:But after the first cycle, then write ebook is removed.
With every dollar spent, you earn a point which can build into a level where you can purchase products, or even have a trip.This isnt perfect for building Learn More Here 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 around, and it's time to write an ebook.Whatever youre teaching is currently in demand, which means that there are other people around who want to know too.Sit down and write an ebook.