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What is Residual IncomeAt its most basic 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 do 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 out of 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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of their charge 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 that:Residual Income Net Income (Time Working + Expenses)By getting 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 create something of value, up front, people will continue to pay for.Writers do so with books.

They set a song and then are able to market it the rest of their lives to produce 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 for money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there's someone who's earning residual passive income.

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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 still earns income from them. If the companies do well, he does 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 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 larger that residual income becomes. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are just two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings in 5-figures a month from ebook sales.Hes able to write them fast on topics that people are looking for.

To earn more money, youd need to keep creating more paintings.To begin earning passive residual income, you need to find something that can be replicated. One that doesnt need to be built every time.The internet has made earning residual passive income so much easier.Digital goods are the simplest form of earnings.

No manufacturing that Related Site needs to take place.Design a few applications, write an ebook, or create a new product that we 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 first cycle, we remove the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle could look like this:But after the initial cycle, write ebook is eliminated.

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With each dollar spent, you earn a point that can build to a level at which you can buy products, or even take a trip.This isnt perfect for building an income snowball, but this is the greatest guide to view residual income so weve got to 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 got some knowledge which you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is currently in demand, which means that there are different people out there who want to know too.Sit down and write an ebook.