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What is Residual IncomeAt its most basic level, residual income is the income earned after all 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 do exactly what they want.In the corporate world, the definition is a bit 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 * 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 from 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 exactly what were paid for. Were trading time for money.In the corporate finance formula, our time would be part of their charge to operate asset.Corporate America considers time as a portion of their 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 the time working down to zero and the expenses as low as possible, were left :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, people will continue to pay for.Writers do this with books.
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The Virgin brand has grown to airlines, mobile phones, record labeland anchor on and on.Mr. Branson doesnt really spend his day daily hours working on each of those businesses, but he earns income from them. If 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 mainly to dividend paying stocks, Mr.
He purchases 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. On the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are just two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has built an ebook that brings in 5-figures a month from ebook sales.Hes able to write them fast on topics people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or create 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. Following the first cycle, we remove the create painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the initial cycle would look like this:But after the first cycle, then write ebook is eliminated.
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With each dollar spent, you earn a point which can build into a level where you can buy goods, or even take a trip.This isnt ideal for building an income snowball, but that really is the greatest guide to residual income so weve got go to my site to pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit already.If youve got some knowledge that you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is already in demand, which means that there are different people around who want to know too.Sit down and write an ebook.