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What's Residual IncomeAt its simplest level, residual income is the income earned after each of the invoices 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 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 (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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of the charge to function asset.Corporate America considers time as part of the bills 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 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 eventual residual income model means youve got to create something of worth , up front, people will continue to cover for.Writers do this with books.
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They record a song and then can sell 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 places an emphasis on creating value for others.Residual Income ExamplesName any musician or writer 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 really spend his day daily hours working on all those businesses, but he earns income from them. his response When the companies do well, he does well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income like Richard Branson, but Buffett also earns passive residual income from all 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 directory each month or quarter, he receives paid.The more shares you purchase, the bigger that residual income becomes more. 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 little guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings in 5-figures per month from ebook sales.Hes able to write them fast on topics that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or produce a new product that we are looking for. Then give people the capacity 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 create painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first cycle would look like this:But after the first cycle, write ebook is eliminated.
With every dollar spent, you over here earn a point that can build to a level at which you can buy products, or even have a trip.This isnt perfect for building an income snowball, but that is the greatest guide to residual income so weve must cover all 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 got some knowledge which you find yourself teaching friends and family about, its time to compose 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.