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What is Residual IncomeAt its simplest level, residual income is the income earned after all the bills and expenses are paid.For the average employee, 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 could 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 from it 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 their cost to function asset.Corporate America considers time as a portion of the invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which would look like that:Residual Income Net Income (Time Working + Expenses)By getting 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 cover for.Writers do this with books.
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They set a song and then are able to sell it the remainder of their lives to make residual income.Their time working following the initial investment has gone into zero.The ultimate passive residual income model moves away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there is someone who's earning residual passive income.
The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on each of those businesses, but he earns income from them. When the companies do well, he does well.Warren Buffett is another shining example. Hes created 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.
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He buys a share of a stock that pays dividends, and each month or quarter, he gets paid.The more stocks you purchase, the bigger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income try this web-site snowball.Now these 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 that brings in 5-figures a month from ebook sales.Hes able to write them quickly on subjects people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a product that we are looking for. Then give people the capacity to download it while you get paid to sleep.This way, the product only needs to be built once. After the initial cycle, we remove the create 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.
With each dollar spent, you earn a point that can build to a level where you can buy products, or even have a trip.This isnt ideal for building an income snowball, but that really is the greatest guide to residual income see so weve must pay our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little index 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 currently in demand, which means there are other folks around who want to know too.Sit down and write an ebook.