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What's Residual IncomeAt its most basic level, residual income is the income earned after all the bills and expenses are paid.For the typical employee, this could be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do 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 (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 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time would be part of their charge 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 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 make something of value, 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, my link listing labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on all these businesses, but he still earns income from get redirected here them. If 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 of his investments.By sticking mainly to dividend paying stocks, Mr.
He buys 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. 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 choice passive residual income example.Steve has built an ebook that brings in 5-figures a month out of ebook sales.Hes able to compose them fast on subjects that people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or produce a new product that people are looking for. Then give individuals the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. After the initial cycle, we remove the make painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the first cycle would look like this:However after the first cycle, then write ebook is eliminated.
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With every dollar spent, you earn a point that can build to a level where you can buy goods, or even have a trip.This isnt ideal for building an income snowball, but this is the greatest lead to residual income so weve must cover 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 that you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is already in demand, which means there are different folks out there who want to know too.Sit down and write an ebook.