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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 typical worker, this would 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 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 capital)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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time could be part of their charge to operate asset.Corporate America considers time as part of their bills paid before theyre paid.Combining the two, 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 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 pay for.Writers do this with books.
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They set a song and then are able to sell it the rest of their lives to produce residual income.Their time working after the initial investment has gone into zero.The ultimate passive residual income model moves away from trading our time for money. It puts 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 really spend his day daily hours working on each of those businesses, but he still 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 of his investments.By sticking mostly to dividend paying stocks, Mr.
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He purchases a share Visit This Link of a stock which pays dividends, and every month or quarter, he receives paid.The more stocks you purchase, the larger that residual income becomes more. To the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are two owners of enormous companies, click here for more info 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 from ebook sales.Hes capable to compose them fast on topics that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or produce a product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This manner, the product 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 example of an ebook, the initial cycle could look like this:But after the initial cycle, then write ebook is eliminated.
With every dollar spent, you earn a point which can build into a level where you can purchase products, 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 got to pay our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little already.If youve got some knowledge which you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is already in demand, which means there are other folks out there who want to know too.Sit down and write an ebook.