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What is Residual IncomeAt its simplest level, residual income is the income earned after all the bills 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 do 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 * 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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time could be a portion of the cost 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 which 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 ultimate residual income model means youve got to make 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, cell phones, record labeland on and on.Mr. Branson doesnt actually spend original site his day daily hours working on all these businesses, but he still earns income from them. If 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 each month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. On the click over here point where Warren Buffett earns about $62 million dollars a 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 built an ebook that brings in 5-figures per month from ebook sales.Hes capable to write them fast on subjects that people are looking for.
No manufacturing that needs to take place.Design a few software, 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 item only needs to be built once. After the initial cycle, we remove the create painting and are going back and forth between market painting and go to this web-site earn money.In the illustration of an ebook, the initial cycle could look like this:However after the initial cycle, write ebook is eliminated.
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With every dollar spent, you earn a point that can build to a level where you can buy goods, or even have a trip.This isnt perfect for building an income snowball, but that really is the ultimate lead to residual income so weve got to pay our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little 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 already in demand, which means there are other people around who want to know too.Sit down and write an ebook.