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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 typical 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 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 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.
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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 compensated for. Were trading time for money.In the corporate finance formula, our time could be a portion of their cost to function asset.Corporate America considers time as part of the invoices paid before theyre paid.Combining both, we get a formula for passive residual income which would seem 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 with: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 valueup front, that people will continue to cover for.Writers do this with books.
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The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all these businesses, but he earns income from them. When the companies do well, he does well.Warren Buffett is another More Info shining example. Hes made 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 receives paid.The more stocks you purchase, the larger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those 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 a 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 some software, write an ebook, or create a new product that we 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. After the first cycle, we remove the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the initial cycle could look like this:But after the first cycle, 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 purchase goods, or even have a trip.This isnt ideal for building an income snowball, but this really is the greatest guide to residual income so weve must cover our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and Visit This Link OpportunitiesWrite an EbookWeve coated this one a bit already.If youve got some knowledge which you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is currently in demand, which means there are other people around who want to know too.Sit down and write an ebook.