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What is Residual IncomeAt its simplest level, residual income is the income earned after each of the invoices and expenses are paid.For the average worker, this could be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do 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 (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 require 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.
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 their charge to operate asset.Corporate America considers time as part of their invoices 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 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 ultimate residual income model means youve got to create something of worth up front, people will continue to cover for.Writers do so with books.
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They record a song and then can market it the rest of their lives to produce residual income.Their time working following the initial investment has gone to 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 is earning residual passive income.
The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on each of those businesses, but he 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 like 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 buys a share of a stock that pays dividends, and every month or quarter, he gets paid.The more stocks you purchase, the larger that residual income becomes. On click over here the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are just 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 compose them fast on subjects that 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 ability to download it while you get paid to sleep.This manner, the item only needs to be built once. After the first cycle, we remove the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle could look like this:But after the first cycle, write ebook is eliminated.
With each dollar spent, you earn a point which can build into a level at which you can purchase products, or even have a trip.This isnt perfect for building an income snowball, but this 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 an EbookWeve coated this one a bit already.If youve acquired some knowledge that you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is already in demand, which means there are other folks around who want to know too.Sit down and write an ebook.