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What is Residual IncomeAt its most basic level, residual income is the income earned after all the invoices and expenses are paid.For the typical employee, this could 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 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 * 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 from 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 exactly what were compensated 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 a portion of the invoices paid before theyre paid.Combining both, we get a formula for passive residual income that 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 ultimate residual income model means youve got to create something of value, up front, people will continue to pay for.Writers do this with books.
They record a song and then are able to sell it the rest 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 ExamplesName any musician or writer and there is someone who is earning residual passive income.
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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 all these businesses, but he earns income from them. If the companies do well, he can well.Warren Buffett is another shining example. my blog Hes made Berkshire Hathaway that brings in income like 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 that pays dividends, and each month or quarter, he gets paid.The more shares you purchase, the bigger 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 those are two owners of enormous 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 per month from ebook sales.Hes capable to compose them quickly on subjects 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 something that can be duplicated. One that doesnt have to be built every time.The internet has made earning residual income so much easier.Digital products are the simplest form of earnings.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a product that we are looking for. Then give individuals 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 eliminate the make 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 go to this website this:However after the initial cycle, write ebook is removed.
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With each dollar spent, you earn a point which can build into a level where you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but this really is the greatest lead to residual income so weve got to pay 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 compose an ebook.Whatever youre teaching is currently in click resources demand, which means there are other folks out there who want to know too.Sit down and write an ebook.