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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 employee, this would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to get 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 (cost of operating assets * price of funds )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 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 a portion of the invoices 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 the 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 ultimate residual income model means youve got to create something of worth , up front, people will continue to cover for.Writers do so with books.
They record a song and then can market it the rest of their lives to produce residual income.Their time working following the initial investment has gone to zero.The ultimate passive residual income model goes away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who is earning residual passive income.
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The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt actually spend his these details day daily hours working on each of these businesses, but he earns income from them. When the companies do well, he can 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 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 receives paid.The more shares you buy, the larger that residual income becomes. To the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are two owners of enormous companies, but what about the small guysSteve Scott is a prime 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 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 duplicated. One that doesnt need to be constructed every time.The internet has made earning residual income so much easier.Digital goods are the simplest type of earnings.
No manufacturing that needs to take place.Design a few software, write an ebook, or produce a new product that people are looking for. Then give people the ability to download it while you get paid to sleep.This way, the item only needs to be built once. After the first cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle Residual Income In Bulgaria would look like this:But after the first cycle, write ebook is eliminated.
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With each dollar spent, you earn a point which can build into a level at which you can buy products, or even take a trip.This isnt ideal for building an income snowball, but that really is the ultimate lead to residual income so weve must pay 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 got some knowledge which you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is already in demand, which means there are different folks around who want to know too.Sit down and write an ebook.