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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 typical employee, this could 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 (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 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 compensated 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 a portion of the bills paid before theyre paid.Combining both, we get a formula for passive residual income which would look like this: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 eventual residual income model means youve got to make something of value, up front, that people will continue to pay for.Writers do this with books.

They record a song and then are able to 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 moves away from trading our time for money. It puts 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, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all those businesses, but he earns income from them. When the companies do well, he does well.Warren Buffett is another shining example. Hes made 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.

He purchases a share of a stock that 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 huge income snowball.Now those are just two owners of enormous companies, but what about the small guysSteve Scott is a prime passive residual use this link income example.Steve has assembled an ebook that brings in 5-figures per month from ebook sales.Hes able to write them quickly on topics that people are looking for.

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

No manufacturing that needs to take place.Design some software, write an ebook, or produce a product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, the product only needs to be built once. Following the first cycle, we eliminate the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the initial cycle could look like this:But after the first cycle, then write ebook is eliminated.

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With each dollar spent, you earn a point which can build to a level where you can purchase products, or even take a trip.This isnt perfect for building an income snowball, but that is the greatest lead to residual income so weve must pay all our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a bit already.If youve got some knowledge which you find yourself teaching friends and family around, and its time to compose an ebook.Whatever youre teaching is already in demand, which means there additional info are different folks out there who want to know too.Sit down and write an ebook.