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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 average employee, 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 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 * 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 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 paid 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 part of their bills paid before theyre paid.Combining both, we get a formula for passive residual income which 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 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, mobile phones, record labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on each of 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 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 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 more. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook empire that brings in 5-figures a month out of ebook sales.Hes able to write them fast on subjects people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a new product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This manner, the product only needs to be built once. Following the first cycle, we remove the create painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the first cycle could look like this:But after the this contact form initial cycle, write ebook is eliminated.
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With every dollar spent, you earn a point that can build into a level where you can purchase goods, or even take a trip.This isnt perfect for building his response an income snowball, but this really is the ultimate guide to residual income so weve must pay all our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little already.If youve acquired home some knowledge that you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is already in demand, which means that there are different people out there who want to know too.Sit down and write an ebook.