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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 worker, this would be their disposable income. Theyve gotten their own 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 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 * price 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 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of their cost to operate 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 that would look like that: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 eventual residual income model means youve got to create something of valueup front, that people will continue to pay for.Writers do this with books.
They record a song and then are able to market it the rest of their lives to make 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 is someone who is earning residual passive income.
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The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on all those businesses, but he earns income from them. When the companies do well, he does 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 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 purchase, the larger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are just two owners of enormous 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 a month from ebook sales.Hes able to compose them quickly on topics people are looking for.
To earn more money, youd need to keep creating more paintings.To begin earning passive residual income, you need to find a product that can be duplicated. One that doesnt have to be built every time.The internet has made earning residual passive income so substantially easier.Digital products are the easiest type of earnings.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a product that people 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 initial cycle, we eliminate the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle could look like this:However after the initial cycle, write ebook is removed.
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With every dollar spent, you earn a point that can build into a level where you can purchase products, 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 cover our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve acquired some click to read more 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 there are other people out there who want to know too.Sit down and write an ebook.