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What is Residual IncomeAt its most basic level, residual income is the income earned after all the invoices and expenses are paid.For the typical employee, this could be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to get 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 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 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time would be part of their cost to function asset.Corporate America considers time as a portion of the invoices paid before theyre paid.Combining the two, we get a formula for passive residual income that would seem like this: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 make something of valueup front, that people will continue to cover for.Writers do this with books.

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They set a song and then are able to 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 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 actually spend his day daily hours working on all those businesses, but he 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 like Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mostly 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 purchase, the bigger that residual income becomes more. To 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 small guysSteve Scott is a prime passive residual income example.Steve has built an ebook that brings in 5-figures a month from ebook sales.Hes able to write them quickly on topics 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 a product which can be duplicated. One that doesnt have to be built every time.The internet has made earning residual income so much easier.Digital goods are the easiest form of earnings.

No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that people are looking for. Then give individuals the capacity to download it while you get paid to sleep.This way, the product only needs to be built once. After the initial cycle, we remove the make painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle could look like this:But after the first cycle, write ebook is removed.

With every dollar spent, you earn a point which can More Info build into a level where you can buy products, or even take a trip.This isnt perfect for building an income snowball, but that really is the greatest 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 bit already.If youve acquired some knowledge which you find yourself teaching friends and family around, and it's time to write an ebook.Whatever youre teaching is already in demand, which means there are different folks around who want to know too.Sit down and write an ebook.