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What is Residual IncomeAt its simplest level, residual income is the income earned after each of the bills and expenses are paid.For the typical worker, this could be their disposable income. Theyve gotten their 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 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 funds )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.
Our time is worth something and we shouldnt discount it.For a normal 9 to 5 job, thats exactly what were paid for. Were trading time for money.In the corporate finance formula, our time would be part of their cost 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 which would look like this:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and 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 eventual residual income model means youve got to create something of valueup front, people will continue to cover 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 goes 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's 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 to day hours working on each of these businesses, but he earns income from them. When the companies do well, he does well.Warren Buffett is another shining example. Hes created Berkshire click over here now Hathaway that brings in income find this 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 buys a share of a stock that pays dividends, and each month or quarter, he receives paid.The more shares you purchase, the bigger that residual income becomes more. To the point where More hints Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now those are two owners of massive companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings in 5-figures a month out of ebook sales.Hes capable to compose them quickly on subjects people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a product that people 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. After the first cycle, we remove the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the first cycle would look like this:However after the first cycle, then write ebook is eliminated.
With every dollar spent, you earn a point that can build to a level at which you can purchase products, or even take a trip.This isnt ideal for building an income snowball, but that is the ultimate guide to residual income so weve got to cover 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 acquired some knowledge which you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is currently in demand, which means there are other people out there who want to know too.Sit down and write an ebook.