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What's Residual IncomeAt its simplest 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 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 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 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 the cost to operate 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 eventual residual income model means youve got to make something of valueup front, that people will continue to cover for.Writers do so with books.
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They set a song and then can sell it the remainder of their lives to make residual income.Their time working following the initial investment has gone to zero.The ultimate passive residual income model goes away from trading our time to get 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, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day hours working on all those businesses, but he earns income from them. If the companies do well, he can well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income such as Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mostly to dividend resource paying stocks, Mr.
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He purchases 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. On the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now those 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 that brings in 5-figures a month from ebook sales.Hes capable to compose them fast on subjects that people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or create a product that we are looking for. Then give individuals the ability to download it while you get paid to sleep.This manner, the item only needs to be built once. After the initial cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the example of an ebook, the initial cycle could look like this:But after the initial cycle, write ebook is removed.
With every dollar spent, you earn a point that can build into a level at which you can buy goods, or even have a trip.This isnt ideal for building an income snowball, but that is the greatest guide to residual income so weve must pay 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, it's time to write an ebook.Whatever youre teaching is currently in demand, which means there are different people around who want to know too.Sit down and write an ebook.