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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the invoices and expenses are paid.For the typical 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 capital)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 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time could be part of the charge 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 that would seem like this: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 eventual residual income model means youve got to make something of valueup front, people will continue to pay for.Writers do so 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 to zero.The ultimate passive residual income model moves away from trading our time to get money. It places an emphasis on creating value for others.Residual Income look these up ExamplesName any musician or author and there is someone who's earning residual passive income.
The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of those businesses, but he earns income from them. If 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 his investments.By sticking mainly to dividend paying stocks, Mr.
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He purchases a share of a stock which pays dividends, and every month or quarter, he gets paid.The more stocks you buy, the larger that residual income becomes. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are two owners of enormous companies, but what about the small 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 capable to compose them quickly on subjects people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or produce a product that we are looking for. Then give individuals the ability to download it while you get paid to sleep.This manner, the product only needs to navigate here be built once. Following the first cycle, we eliminate the make painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the first cycle could look like this:However after the first cycle, write find more information ebook is eliminated.
With every dollar spent, you earn a point which can build to a level at which you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but this is the greatest guide to residual income so weve got to pay all 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 acquired some knowledge that you find yourself teaching friends and family about, it's 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.