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What's Residual IncomeAt its simplest level, residual income is the income earned after all the invoices and expenses are paid.For the typical 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 (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 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 what were paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of their cost to function asset.Corporate America considers time as part of the invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which would seem like this:Residual Income Net Income (Time Working + Expenses)By getting the time working down to zero and 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 eventual residual income model means youve got to make something of valueup front, that people will continue to pay for.Writers do so with books.

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

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The Virgin brand has grown to airlines, mobile phones, listing labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on all these businesses, but he earns income from them. When the companies advice 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 of 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 gets paid.The more shares you purchase, the bigger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars a 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 that brings in 5-figures a month out of ebook sales.Hes capable to compose them quickly on subjects people are looking for.

To earn more money, youd need to keep creating more paintings.To start 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 income so substantially easier.Digital goods are the simplest form of earnings.

No manufacturing that needs to take place.Design a few software, write an ebook, or produce a product that we are looking for. Then give people the capacity to download it while you get paid to sleep.This way, the product only needs to be built once. After the initial cycle, we eliminate the create 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 first cycle, then write ebook is eliminated.

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With every dollar spent, you earn a point which can build to a level at which you can purchase products, or even have webpage a trip.This isnt perfect for building an income snowball, but this really is the ultimate guide to residual income so weve must cover 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 acquired some knowledge which you find yourself teaching friends and family about, its time to write an ebook.Whatever youre teaching is already in demand, which means there are different people around who want to know too.Sit down and write an ebook.