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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 typical employee, this could be their disposable income. Theyve gotten their own 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 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 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 from 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 compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of the cost to function 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 seem 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 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 valueup front, that people will continue to pay for.Writers do so with books.

They record a song and then can sell 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 to get 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, listing labeland on and on.Mr. Branson doesnt actually spend his day to day 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 created Berkshire Hathaway that brings in income like Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.

He buys a share of a stock that pays dividends, and every month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a huge income snowball.Now those are two owners of massive companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook that brings in 5-figures per month out of ebook sales.Hes capable to compose 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 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 products are the simplest type of earnings.

No manufacturing that needs to take place.Design some software, link write an ebook, or produce a new product that people are looking for. Then give people the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. Following the initial 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 first cycle could look like this:However after the initial cycle, then write ebook is eliminated.

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With every dollar spent, you earn a point which can build to a level where you can purchase goods, or even have a trip.This isnt ideal for building an income snowball, but that really is the greatest guide to residual income so weve got to cover all 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 acquired some knowledge that you find yourself teaching friends and family around, and it's time to write an ebook.Whatever youre teaching is already in demand, which means that there are different folks out visit this site there who want to know too.Sit down and write an ebook.