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What is Residual IncomeAt its simplest level, residual income is the income earned after each of the invoices 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 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 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.
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 part of the bills paid before theyre paid.Combining the two, we get a formula for passive residual income that would seem like that: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 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 value, up front, people will continue to pay for.Writers do so with books.
Residual Income In Argentina - Passive Residual Income for Beginners
They record a song and then can market it the remainder of their lives to make residual income.Their time working after the initial investment has gone into zero.The ultimate passive residual income model goes away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there's someone who's earning residual passive income.
The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all 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 such as Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mainly to dividend paying stocks, Mr.
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He purchases a share of a stock which pays dividends, and each month or quarter, he gets paid.The more shares you buy, the larger that residual income becomes. On the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are two owners of massive 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 a month from ebook sales.Hes able to compose them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or produce a new product that people are looking for. Then give people the ability to download it while you get paid to sleep.This manner, the item only needs to be built once. Following 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 could look like this:However after the initial cycle, then write ebook is eliminated.
With every dollar spent, you earn a point that can build into a level at which you can purchase goods, or even have a trip.This isnt perfect for building an income snowball, but this is the ultimate lead to residual income so weve must cover our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite investigate this site an EbookWeve covered this one a bit already.If youve acquired some knowledge that you find yourself teaching friends and family around, and its time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are different people around who want to know too.Sit down and write an ebook.