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What is 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 would 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 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 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 would be part of the charge to function asset.Corporate America considers time as part of the invoices paid before theyre paid.Combining the two, 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 eventual residual income model means youve got to create something of worth up front, people will continue to cover 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 actually spend his day to day hours working on each of these businesses, but he earns income from them. When the companies do well, he can well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income such as 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 which pays dividends, and every month or quarter, he receives paid.The more stocks you buy, the bigger that Full Article 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 these 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 that brings in 5-figures a month out of ebook sales.Hes able to compose them fast on topics people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that people are looking for. Then give people the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. After the initial 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 would look like this:But after the initial cycle, then write ebook is removed.
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With every dollar spent, you earn a point which can build to a level at which you can purchase goods, or even take a trip.This isnt ideal for building an income snowball, but that really is the ultimate lead to residual income so weve must pay 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 that you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is already in demand, which means there are different people around who want to know too.Sit down and write an ebook.