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What is Residual IncomeAt its most basic level, residual income is the income earned after all the bills and expenses are paid.For the typical worker, this could be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do exactly 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 take 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 their invoices paid before theyre paid.Combining both, we get a formula for passive residual income that would look like this:Residual Income Net Income (Time Working + Expenses)By getting the time working down to zero and 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 valueup front, that people will continue to pay for.Writers do this with books.
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They set a song and then can 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 is earning residual passive income.
The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on all these businesses, but he still earns income from them. If 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 receives paid.The more shares you buy, the larger that residual income becomes. To the point where Warren Buffett earns roughly navigate to these guys $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are two owners of massive companies, but what about the little 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 compose them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that people are looking for. Then give browse around here individuals the ability to download it while you get paid to sleep.This manner, the item only needs to be built once. Following the first cycle, we remove the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle would look like this:But after the first cycle, then write ebook is eliminated.
With each dollar spent, you earn a point that can build to a level at which you can buy goods, or even have a trip.This isnt perfect for building an income snowball, but that is the greatest lead to residual income so weve must pay our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a bit already.If youve helpful resources got some knowledge which you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is currently in demand, which means there are other folks around who want to know too.Sit down and write an ebook.