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What's Residual IncomeAt its simplest level, residual income is the income earned after all the invoices 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 what they want.In the corporate world, the definition is somewhat different.
You could 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 take 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 paid for. Were trading time for money.In the corporate finance formula, our time could be part of their cost to function asset.Corporate America considers time as part of the invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which would look like this:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and also the expenses as low as possible, were left with: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 worth , up front, that people will continue to cover for.Writers do so with books.
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They set a song and then are able to sell it the remainder of their lives to make 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 for money. It places 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, mobile phones, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all these 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 such as Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mainly to dividend paying stocks, Mr.
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He buys a share of a advice stock that pays dividends, and every month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are just two owners of massive 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 out of ebook sales.Hes able to compose them fast 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 people are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, the product only needs to be built once. Following the first cycle, we remove the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the first cycle would look like this:But after the first cycle, write ebook is removed.
With each dollar spent, you earn a see it here point that can build into a level at which you can buy products, 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 cover all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve acquired some knowledge which you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is already in demand, which find out this here means there are different folks around who want to know too.Sit down and write an ebook.