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What's Residual IncomeAt its most basic 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 could 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 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 could be a portion of the cost 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 that:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and also the expenses as low as possible, were left with: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 value, up front, people will continue to pay for.Writers do so with books.
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They set a song and then can market it the remainder of their lives to produce residual income.Their time working following 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 writer and there's someone who's earning residual passive income.
The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on each of those businesses, but he still 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 of his investments.By sticking mostly to dividend paying stocks, Mr.
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He purchases a share of a stock which pays dividends, and each month or quarter, he gets paid.The more stocks you purchase, the bigger that residual income becomes more. To the point where Warren Buffett earns about $62 million pop over to this site dollars per year on dividend payments. Thats a huge income snowball.Now those are just two owners of massive companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook that brings in 5-figures per month out of ebook sales.Hes able to compose them fast on topics people are looking for.
No manufacturing that needs to take place.Design some applications, 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 way, the product only needs to be built once. Following the first cycle, we remove the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first 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 this at which you can purchase goods, or even have a trip.This isnt ideal for building an income snowball, but that really is the greatest guide to residual income so weve got to cover all our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite weblink an EbookWeve covered this one a little already.If youve acquired some knowledge that you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are other people out there who want to know too.Sit down and write an ebook.