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What's Residual IncomeAt its most basic level, residual income is the income earned after all the invoices and expenses are paid.For the typical employee, this could be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do 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 * price 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 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 could be part of their cost to operate asset.Corporate America considers time as a portion of the bills paid before theyre paid.Combining both, we get a formula for passive residual income which would seem 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 :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 value, up 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 remainder of their lives to produce residual income.Their time working after the initial investment has gone into zero.The ultimate passive residual income model moves away from trading our time for money. It places 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, cell phones, listing labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on all those businesses, but he earns income from them. When the companies do well, he does well.Warren Buffett browse around these guys 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 his investments.By sticking mostly to dividend paying stocks, Mr.
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He buys a share of a stock which pays dividends, and every month or quarter, he receives paid.The more stocks you buy, the bigger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a huge income snowball.Now those 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 that brings in 5-figures a month from ebook sales.Hes capable to write them fast on subjects people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a product that we are looking for. Then give people the ability to download it while you get paid to sleep.This manner, the product only needs to be built once. After the initial 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 removed.
With every dollar spent, you earn a point which can build to a level at which you can purchase goods, or even take a trip.This isnt ideal for building an income pop over here snowball, but that is the ultimate lead to residual income this article so weve got to pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a bit already.If youve got 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.