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What's Residual IncomeAt its most basic level, residual income is the income earned after each of the invoices and expenses are paid.For the typical worker, this could be their disposable income. Theyve gotten their own 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 could call this passive residual income.Residual Income FormulaFor corporate America, the formula looks like this:Residual Income net operating income (cost 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 require 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time would be part of their charge to function asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining both, we get a formula for passive residual income that would seem 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 ultimate residual income model means youve got to create something of worth , up front, people will continue to pay for.Writers do so with books.
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They record 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 to zero.The ultimate passive residual income model goes away from trading our time for money. It places an emphasis on creating value browse around here for others.Residual Income ExamplesName any musician or writer 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 each of i loved this those businesses, but he earns income from them. When the companies do well, he can well.Warren Buffett is another shining example. Hes created Berkshire Hathaway that brings in income like Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.
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He purchases a share of a stock which pays dividends, and every month or quarter, he gets paid.The more stocks you buy, the larger that residual income becomes more. On the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are just two owners of enormous 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 a month out of ebook sales.Hes capable to write them quickly on subjects that people are looking for.
To earn more money, youd need to keep creating more paintings.To begin earning passive residual income, you need to find something that can be duplicated. One that doesnt need to be built every time.The internet has made earning residual passive income so much easier.Digital products are the simplest form of earnings.
No manufacturing that needs to take place.Design some software, write an ebook, or produce a product that people are looking for. Then give people the ability to download it while you get paid to sleep.This way, the item only needs to be built once. After the first cycle, we eliminate the create 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 which can build into a level where you can buy goods, or even have a trip.This isnt perfect for building an income snowball, but this really is the ultimate lead to residual income so weve must cover all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little already.If youve acquired some knowledge that you find yourself teaching friends and family about, its time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are different folks out there who want to know too.Sit down and write an ebook.