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What's 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 paycheck. Then paid the monthly expenses and have some money leftover to get what they want.In the corporate world, the definition is somewhat 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 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 a portion of their cost to operate asset.Corporate America considers time as a portion of their invoices 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 the 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 create something of worth up front, that people will continue to pay for.Writers do this with books.
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The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on all these businesses, but he earns income from them. When the companies do well, he can well.Warren Buffett is another shining example. Hes created 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 every month or quarter, he receives paid.The more stocks you buy, the larger that residual income becomes. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those are two owners of enormous companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings in 5-figures per month from ebook sales.Hes able to write them quickly on topics that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This manner, 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 first cycle would look like this:But after the initial cycle, write ebook is removed.
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With every dollar spent, you earn a point that can build into a level at which you can buy see this website goods, or even have a trip.This isnt perfect for building an income snowball, but that is the ultimate guide to residual income so weve must pay our bases.Speaking of examples, lets look hop over to these guys at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve got some knowledge which you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is currently in demand, which means there are different people around who want to know too.Sit down and write an ebook.