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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 typical employee, this could be their disposable income. Theyve gotten their own 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 capital)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 out of it so youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.

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 their charge to function 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 which would seem 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 ultimate residual income model means youve got to create something of worth up front, that people will continue to pay for.Writers do this with books.

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They set a song and then can sell it the rest of their lives to make residual income.Their time working following the initial investment has gone into zero.The ultimate passive residual income model moves away from trading our time to get money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there's someone who is earning residual passive income.

The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all those businesses, but he 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 like Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mostly to dividend paying stocks, Mr.

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He purchases a share of a stock that pays dividends, and every month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes more. To the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are check my blog two owners of enormous companies, but what about the little 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 quickly on subjects that people are looking for.

To his response earn more money, youd need to keep creating more paintings.To begin earning passive residual income, you need to find something that can be duplicated. One that doesnt need to be built every time.The internet has made earning residual passive income so substantially easier.Digital products are the easiest type of earnings.

No manufacturing that needs to take place.Design some applications, write an ebook, or produce a product that people 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. Following the initial cycle, we eliminate the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the first cycle could look like this:But after the first cycle, write ebook is eliminated.

With each dollar spent, you earn a point which can build to a level at which you can purchase products, or even take a trip.This isnt ideal for building an income snowball, but that is the greatest guide to residual income so weve must pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit already.If youve got some knowledge that you find yourself teaching friends and family about, its 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.