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What is Residual IncomeAt its most basic level, residual income is the income earned after all the invoices 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 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 out of 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 a portion of their charge to function asset.Corporate America considers time as part of their invoices paid before theyre paid.Combining the two, we get a formula for passive residual income which would seem like that:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and the expenses as low as possible, were left :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 worth up front, people will continue to cover for.Writers do this with books.
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The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of those 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 like Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mostly to dividend paying stocks, Mr.
He purchases a share of a stock which pays check my blog dividends, and each month or quarter, he gets paid.The more stocks you purchase, the larger that residual income becomes. On 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 built an ebook that brings in 5-figures per month out of ebook sales.Hes capable to write them fast on topics people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or create a product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This way, the product only needs to be built once. After the first cycle, we remove the make painting and are going back read this and forth between sell painting and earn money.In the illustration of an ebook, the first cycle could look like this:However after the first cycle, then write ebook is removed.
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With every dollar spent, you earn a point that can build into a level where you can buy goods, or even take a trip.This isnt perfect for building an income snowball, but that is the ultimate lead to residual income so weve got to pay all our bases.Speaking of illustrations, lets look see this page at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little already.If youve acquired some knowledge that you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is already in demand, which means that there are different people out there who want to know too.Sit down and write an ebook.