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What is Residual IncomeAt its simplest level, residual income is the income earned after each of the bills and expenses are paid.For the average employee, this could be their disposable income. Theyve gotten their own 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 (expense of operating assets * price of funds )For personal finance, the formula looks like this:Residual Income Net Income ExpensesSay you earn a check for $3,000. Taxes take a $500 chunk out of it so youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.
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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 a portion of the charge to function asset.Corporate America considers time as part of their invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which 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 eventual residual income model means youve got to create something of value, up front, people will continue to pay for.Writers do so with books.
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The Virgin brand has grown to airlines, mobile phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day hours working on all these businesses, but he still 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 such as Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.
He buys a share of a stock that pays dividends, and every month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are two owners of massive companies, Continue but what about the little guysSteve Scott is a prime passive residual income example.Steve has built an ebook that brings in 5-figures per month from ebook sales.Hes capable to write them quickly on topics people are looking for.
No manufacturing that needs to take place.Design a few 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 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 illustration find out this here of an ebook, the initial cycle could look like this:But after the initial cycle, then write ebook is removed.
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With each dollar spent, you earn a point which can build to a level where you can buy products, or even have a trip.This isnt ideal for building an income snowball, but that really is the ultimate lead to residual income so weve must cover our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a bit already.If youve acquired some knowledge which you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are different people out there who want to know too.Sit down and write an ebook.