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What's 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 would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to get 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 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 what were paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of the cost to operate asset.Corporate America considers time as a portion of their bills paid before theyre paid.Combining both, we get a formula for passive residual income that 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 ultimate residual income model means youve got to make something of worth up front, people will continue to pay for.Writers do this with books.
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They record a song and then are able to market it the remainder of their lives to make 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 to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there's someone who's 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 all these have a peek at these guys businesses, but he still earns income from them. When 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 his investments.By sticking mostly to dividend paying stocks, Mr.
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He purchases a share of a stock that pays dividends, and every month or quarter, he receives paid.The more stocks you buy, the bigger that residual income becomes more. To the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now those are two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire 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 software, write an ebook, or produce a new product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, the product only needs to be built once. After the initial cycle, we eliminate the make painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle could look like this:But after the initial cycle, then write ebook is eliminated.
With every dollar spent, you earn a point that can build into a level where you can buy products, or even have a trip.This pop over here isnt perfect for building an income snowball, but that is the ultimate lead 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 that you find yourself teaching friends and family around, and its time to compose an ebook.Whatever youre teaching is already in demand, which means there are other folks out there who want to know too.Sit down and write an ebook.