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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 average worker, this could be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to get 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 * 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 could be a portion of their cost 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 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 make something of valueup front, people will continue to cover for.Writers do this 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 to day hours look here working on all those businesses, but he earns income from them. When the companies do well, he does well.Warren Buffett is another shining example. 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 purchases a share of a stock that pays dividends, and each month or quarter, he receives paid.The more shares you purchase, the larger that residual income becomes more. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are just two owners of massive companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook that brings in 5-figures a month out of ebook sales.Hes capable to compose them fast on topics that people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a product that people 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. Following the first cycle, we eliminate the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the initial cycle could look like this:But after the first cycle, then write ebook is removed.
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With every dollar spent, you earn a point that can build to a level where you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but this is the greatest lead to residual income so you can try these out weve must get more 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 acquired some knowledge that you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are different folks out there who want to know too.Sit down and write an ebook.