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What is Residual IncomeAt its most basic level, residual income is the income earned after all 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 can 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 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 would be a portion of their cost to function 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 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 :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 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 following the initial investment has gone into zero.The ultimate passive residual income model goes 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, record labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on all these businesses, but he still earns income from them. If 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 Continue 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 each month more helpful hints or quarter, he gets paid.The more stocks you buy, the larger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars per 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 per month from ebook sales.Hes able to compose them quickly 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 individuals the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. Following the initial cycle, we eliminate the make my latest blog post painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the initial cycle could look like this:However after the first cycle, write ebook is eliminated.
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 snowball, but this is the ultimate guide to residual income so weve got to pay 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 its time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are other folks around who want to know too.Sit down and write an ebook.