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What is Residual IncomeAt its simplest level, residual income is the income earned after all the invoices 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 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 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 compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of the cost to function asset.Corporate America considers time as a portion of the invoices paid before theyre paid.Combining both, we get a formula for passive residual income which would look like that: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 make something of worth up front, that people will continue to cover for.Writers do this with books.
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They set a song and then can sell it the remainder of their lives to make 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 for money. It places 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, mobile phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day hours working on all those businesses, but he still earns income from them. If the companies do well, he does well.Warren Buffett is another shining example. Hes made try this site Berkshire Hathaway that brings in income like 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 stock that pays dividends, and every month or quarter, he receives paid.The more stocks you buy, the larger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a huge income snowball.Now those are just two owners of enormous companies, but what about the little guysSteve Scott is a prime 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 some applications, write an ebook, or create a product that we are looking for. Then give individuals the capacity to download it while you get paid see post to sleep.This way, the item only needs to be built once. After the first cycle, we eliminate the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle would look like this:However after the initial cycle, then write ebook is eliminated.
With every dollar spent, you earn a point which can build to a level at which you can purchase goods, or even take a trip.This isnt ideal for building an income snowball, but that really is the ultimate lead to residual income so weve must pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one look at more info a bit already.If youve got 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 people out there who want to know too.Sit down and write an ebook.