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What is Residual IncomeAt its simplest 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 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 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 paid for. Were trading time for money.In the corporate finance formula, our time would be part 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 seem 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 eventual residual income model means youve got to make something of value, up front, people will continue to cover for.Writers do this with books.

They set a song and then can market it the rest 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's earning residual passive income.

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The Virgin brand has grown to airlines, cell phones, listing go labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all those businesses, but he still earns income from them. If the companies do well, he Look At This 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 of his investments.By sticking mainly to dividend paying stocks, Mr.

He purchases a share of a stock which pays dividends, and every month or quarter, he receives paid.The more shares you purchase, the bigger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars per 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 choice passive residual income example.Steve has assembled an ebook that brings in 5-figures per month from ebook sales.Hes able to compose 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 which can be replicated. One that doesnt need to be built every time.The internet has made earning residual income so substantially easier.Digital products are the easiest type of earnings.

No manufacturing that needs to take place.Design some applications, write recommended you read an ebook, or create a new product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This manner, the product only needs to be built once. After the initial cycle, we remove the create painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle would look like this:However after the first cycle, write ebook is removed.

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With every dollar spent, you earn a point which can build into a level where you can buy products, or even take a trip.This isnt perfect for building an income snowball, but that is the ultimate guide to residual income so weve must pay our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve got some knowledge that you find yourself teaching friends and family about, its time to write an ebook.Whatever youre teaching is currently in demand, which means there are other folks out there who want to know too.Sit down and write an ebook.