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What is Residual IncomeAt its most basic 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 own paycheck. Then paid the monthly expenses and have some money leftover to do exactly 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 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 out of it youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.
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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 part of the charge to function asset.Corporate America considers time as part of their invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which would look like this:Residual Income Net Income (Time Working + Expenses)By getting the 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 worth up front, people will continue to cover for.Writers do so with books.
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The Virgin brand has grown to airlines, mobile phones, listing visit this web-site labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on all these 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 mainly to dividend paying stocks, Mr.
He purchases a share of a stock that pays dividends, and every month or quarter, he gets paid.The more shares you buy, the larger that residual income becomes more. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings in 5-figures a month out of ebook sales.Hes able to compose them quickly on topics people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or create a product that people are looking for. Then give individuals 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 sell painting and earn money.In the example of an ebook, the initial cycle could look like this:However after the first cycle, write ebook is removed.
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With every dollar spent, you earn a point that can build to a level at which you can buy goods, or even take a trip.This isnt ideal for building an income snowball, but this really is the greatest lead to residual income so weve must pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit already.If youve acquired some knowledge which you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is already in demand, which means there are other people around who want to know too.Sit down and write an ebook.