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What is 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 would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to get exactly what they want.In the corporate world, the definition is somewhat different.
You can call this passive residual income.Residual Income FormulaFor corporate America, the formula looks like this:Residual Income net operating income (cost 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 require a $500 chunk from it 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 would be a portion of their cost to function asset.Corporate America considers time as a portion of the bills paid before theyre paid.Combining both, we get a formula for passive residual income that would look like this:Residual Income Net Income (Time Working + Expenses)By getting the time working down to zero and 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 value, up front, that people will continue to cover for.Writers do so with books.
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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 each of those businesses, but he still earns income from them. When 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 mostly to dividend paying stocks, Mr.
He purchases a share of a stock which pays dividends, and every month or quarter, he gets paid.The more stocks you buy, the bigger that residual income becomes. On the point pop over to this web-site where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those are just two owners of massive companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings in 5-figures a 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 software, write an ebook, or produce a product that people are looking for. Then give people the ability to download it while you get paid to sleep.This way, the item only needs to be built once. After the initial 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 removed.
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With every dollar spent, you earn a point that can build to a level at which you can purchase products, or even take a trip.This isnt ideal for building an income snowball, but this is the greatest lead to residual income so weve got to cover 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 around, and its time to compose an ebook.Whatever youre teaching is currently in demand, which means there are other people out there who want to know too.Sit down and write an ebook.