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What's Residual IncomeAt its most basic level, residual income is the income earned after all the invoices and expenses are paid.For the typical employee, this would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to get exactly what they want.In the corporate world, the definition is somewhat different.

You could 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 capital)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 exactly what were paid for. Were trading time for money.In the corporate finance formula, our time could be part of the charge to function asset.Corporate America considers time as a portion of the invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which would seem 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 ultimate residual income model means youve got to make something of value, up front, that people will continue to cover for.Writers do so with books.

They record a song and then can market it the remainder of their lives to produce 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 for money. It places an Resources emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there's someone who's earning residual passive income.

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The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day 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 made Berkshire Hathaway that brings in income such as Richard this page 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 buy, the bigger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are just two owners of massive 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 out of ebook click site 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 begin earning passive residual income, you need to find a product that can be duplicated. One that doesnt need to be built every time.The internet has made earning residual income so substantially easier.Digital goods are the easiest type 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 individuals the ability to download it while you get paid to sleep.This way, the item 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 initial cycle, write ebook is eliminated.

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With every dollar spent, you earn a point that can build to a level at which you can buy products, or even have a trip.This isnt perfect for building an income snowball, but this is the greatest guide to residual income so weve got to pay 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 which you find yourself teaching friends and family about, its time to write an ebook.Whatever youre teaching is currently in demand, which means that there are other people out there who want to know too.Sit down and write an ebook.