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What is Residual IncomeAt its simplest level, residual income is the income earned after all 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 do exactly what they want.In the corporate world, the definition is a bit different.

You can 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 funds )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 what were paid for. Were trading time for money.In the corporate finance formula, our time would be a portion of the charge to operate asset.Corporate America considers time as part of the bills paid before theyre paid.Combining both, we get a formula for passive residual income that would look like this:Residual Income Net Income (Time Working + Expenses)By getting 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 eventual residual income model means youve got to create something of worth , up front, people will continue to cover for.Writers do this with books.

They set a song and then can market it the remainder 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 for 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.

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The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day to day 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 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 gets paid.The more stocks you purchase, the larger that residual income becomes more. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings in 5-figures per month from ebook sales.Hes capable to write them quickly on subjects 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 which can be replicated. One that doesnt need to be constructed every time.The internet has made click here for more earning residual income so much easier.Digital products 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 people are looking for. Then give people the capacity to download it while you get paid to sleep.This way, the item her comment is here only needs to be built once. After the initial cycle, we remove the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the initial cycle would look like this:But after the first cycle, write ebook is removed.

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With each dollar spent, you earn a point which can build to a level at which you can buy goods, or even take a trip.This isnt perfect for building an income snowball, but that is the ultimate guide to residual income so weve got to cover all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve got some knowledge that you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is currently in demand, which means there are different folks out there who want to know too.Sit down and write an ebook.