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What's Residual IncomeAt its simplest level, residual income is the income earned after all the invoices and expenses are paid.For the average worker, this would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do 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 (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 take a 500 chunk out of it so 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 paid for. Were trading time for money.In the corporate finance formula, our time would be part of their cost to operate asset.Corporate America considers time as part of their bills paid before theyre paid.Combining both, 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 ultimate residual income model means youve got to create something of worth , up front, people will continue to cover for.Writers do so with books.
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The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day to my latest blog post day hours working on all those businesses, but he earns income from them. When the companies do well, best site 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 of his investments.By sticking mainly to dividend paying stocks, Mr.
He buys a share of a stock which pays dividends, and each month or quarter, he receives paid.The more stocks you buy, the bigger that residual income becomes more. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now those are two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook that brings in 5-figures per 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 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 item only needs to be built once. Following the initial cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the go to my site example of an ebook, the first cycle could look like this:However after the first cycle, write ebook is eliminated.
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With each dollar spent, you earn a point which can build into a level where you can purchase goods, or even take a trip.This isnt perfect for building an income snowball, but that is the greatest lead 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 little 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 already in demand, which means there are different folks around who want to know too.Sit down and write an ebook.