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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 typical worker, this would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to get what they want.In the corporate world, the definition is a bit different.
You can 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 take 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.
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Our time is worth something and we shouldnt discount it.For a normal 9 to 5 job, thats what were paid for. Were trading time for money.In the corporate finance formula, our time would be part of the cost to operate asset.Corporate America considers time as part of their bills 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 also 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, that people will continue to cover for.Writers do so with books.
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The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on all those businesses, but he still 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 mostly to dividend paying stocks, Mr.
He buys a share of a stock which pays dividends, and every month or quarter, he receives paid.The more shares 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 my site a huge income snowball.Now those are two owners of massive companies, but what about the small 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 capable to compose them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design some software, 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 manner, the product only needs to be built once. After the initial cycle, we remove the create painting and are going back and forth between sell painting and earn money.In the example of an ebook, the initial cycle would look like this:However after the first cycle, then write ebook is removed.
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With every dollar spent, you earn a point that can build into a level at which you can buy goods, or even have a trip.This isnt ideal for building an income snowball, but this really is the ultimate guide to residual income so weve must pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve acquired some knowledge which you find yourself teaching friends and family about, its time to compose an ebook.Whatever youre teaching is currently in demand, which means there are different folks around who want to know too.Sit down and write an ebook.