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What's Residual IncomeAt its most basic level, residual income is the income earned after each of the bills 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 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 so 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 function asset.Corporate America considers time as part of their bills paid before theyre paid.Combining both, we get a formula for passive residual income which would look like this: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 with: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 into 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's earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all these businesses, but he still 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 this content share of a stock that pays dividends, and every month or quarter, he gets paid.The more stocks you buy, the bigger that residual income becomes more. To 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 small guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures per month from ebook sales.Hes capable to compose them quickly 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 we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. Following the first cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the example of an ebook, the first cycle could look like this:But after the initial cycle, write ebook is eliminated.
With every dollar spent, you earn a point that can build to a level at which you can buy goods, or find here even take a trip.This isnt ideal for building an income snowball, but that really is the greatest lead click reference 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 coated this one a bit already.If youve got some knowledge which 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 different people out there who want to know too.Sit down and write an ebook.