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What's Residual IncomeAt its most basic level, residual income is the income earned after each of the bills and expenses are paid.For the typical worker, this would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do 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 (cost of operating assets * cost of capital)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 could be part of the charge to operate asset.Corporate America considers time as a portion of their bills paid before theyre paid.Combining both, we get a formula for passive residual income that would look like that:Residual Income Net Income (Time Working + Expenses)By getting 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 worth , up front, that people will continue to pay for.Writers do so 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 still earns income from them. If 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 click this earns passive residual income from all 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 buy, the larger that residual income becomes. On the point advice where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now those are two owners of massive companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook that brings in 5-figures per month out of ebook sales.Hes capable to write them fast on topics that people are looking for.
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 item only needs to be built once. After the first cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle could look like this:However after the initial cycle, then write ebook is eliminated.
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With each dollar spent, you earn a point which can build to a level where you can buy products, or even take a trip.This isnt ideal for building an income snowball, but this is the greatest lead to residual income so weve got to pay our bases.Speaking of illustrations, moved here lets look 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 that there are other folks around who want to know too.Sit down and write an ebook.