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What is Residual IncomeAt its most basic level, residual income is the income earned after all the bills and expenses are paid.For the average worker, this would be their disposable income. Theyve gotten their own 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 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 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 paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of their charge 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 look like this: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 make something of worth up front, people will continue to cover for.Writers do this with books.

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They set a song and then are able to market it the rest of their lives to make residual income.Their time working following the initial investment has gone to zero.The ultimate passive residual income model moves away from trading our time to get money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who's earning residual passive income.

The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of these businesses, but he 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 mostly to dividend paying stocks, Mr.

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He purchases a share of a stock which pays dividends, and every month or quarter, he receives paid.The more shares 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 those are two owners of enormous companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures a month out of ebook sales.Hes capable to compose them quickly on subjects 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 find something which can be replicated. One that doesnt need to be built every time.The internet has made earning residual income so much easier.Digital goods are the easiest 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 ability to download it while you get paid to sleep.This manner, 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 example of an ebook, the initial cycle would look like this:However after the first cycle, then write ebook is removed.

With every dollar spent, you earn a point that can build into a level where you can purchase products, or even take a check over here trip.This isnt perfect for building an income snowball, but this really is the ultimate guide 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 about, its time to compose an ebook.Whatever youre teaching is currently in demand, which means there are different people out there who want to know too.Sit down and write an ebook.