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What's Residual IncomeAt its most basic level, residual income is the income earned after all 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 do 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 (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 take a 500 chunk out of 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 paid for. Were trading time for money.In the corporate finance formula, our time could be part of the charge to operate asset.Corporate America considers time as part of the 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 eventual residual income model means youve got to make something of value, up front, people will continue to pay for.Writers do so with books.
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The Virgin brand has grown to airlines, mobile phones, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all these businesses, but he still earns income from them. When the companies do well, he does 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 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 gets paid.The more stocks you purchase, the bigger that residual income becomes. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now those are just two owners of massive companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook empire that brings in 5-figures a month from ebook sales.Hes capable to write them fast on subjects people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a new product that people are looking Going Here for. Then give people the capacity to download it while you get paid to sleep.This manner, the product only needs to be built once. After the first cycle, we eliminate 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 into a level at which you can buy goods, or even have a trip.This isnt ideal for building an income snowball, but that really is the ultimate guide to residual income so weve must pay our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little already.If youve acquired some knowledge that you find yourself teaching friends and family about, its time to compose 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.