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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the bills and expenses are paid.For the average worker, 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 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 (cost of operating assets * price 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 from it so youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.
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 could be a portion of the charge to operate asset.Corporate America considers time as part of their invoices paid before theyre paid.Combining the two, we get a formula for passive residual income that would seem like this:Residual Income Net Income (Time Working + Expenses)By getting 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 make something of worth , up front, people will continue to cover for.Writers do this with books.
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They set a song and then can sell it the rest of their lives to produce residual income.Their time working after the initial investment has gone into zero.The ultimate passive residual income model goes away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who is earning residual passive income.
The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day to day hours working on all these businesses, but he still earns income from them. If the companies do well, he can well.Warren Buffett is another shining example. Hes created Berkshire Hathaway that brings in income such as Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.
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He purchases a share of a stock that pays dividends, and every month or quarter, he receives paid.The more stocks you buy, the larger that residual income becomes. To the point where Warren try this Buffett earns roughly $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are just 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 able to write them fast on subjects people are looking for.
To earn more money, youd need to keep creating more paintings.To start earning passive residual income, you need to find something that can be replicated. One that doesnt need to be built every time.The internet has made earning residual income so substantially easier.Digital products are the simplest type of earnings.
No manufacturing that needs to take place.Design a few software, write an ebook, or produce a product that we 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. After the initial cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the example of an ebook, the first cycle would look like this:However after the first cycle, then write ebook is removed.
With each dollar spent, you earn a point which can build to a level at which you can buy goods, or even have a trip.This read the full info here isnt ideal for building an income snowball, but that is the ultimate lead to residual income so weve got to pay all our bases.Speaking of illustrations, lets look at a few.Residual Income More Bonuses Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve got some knowledge which you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is currently in demand, which means there are different people out there who want to know too.Sit down and write an ebook.