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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 employee, 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 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 funds )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 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time could be a portion of their charge to operate asset.Corporate America considers time as a portion of their bills paid before theyre paid.Combining the two, we get a formula for passive residual income that would look like this:Residual Income Net Income (Time Working + Expenses)By getting the 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 worth , up front, 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 daily hours working on each of those businesses, but he earns income from them. When the companies do well, he does well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income like Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.
He buys a read this share of a stock which pays dividends, and each month or quarter, he receives paid.The more stocks you purchase, the larger that residual income becomes. To the point where Warren Buffett earns roughly $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 choice passive residual income example.Steve has assembled an ebook empire that brings in 5-figures a month out of ebook sales.Hes capable to compose them quickly on topics that people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a new product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This way, the product 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 visite site example of an ebook, the first cycle would look like this:But after the first cycle, write ebook is removed.
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With every dollar spent, you earn a point that can build to a level where you can purchase goods, or even have a trip.This isnt perfect for building an income snowball, but this 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 OpportunitiesWrite an EbookWeve covered this one a bit already.If youve acquired 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 out there who want to know too.Sit down and write an ebook.