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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 average employee, this would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do 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 (expense 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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of the 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 that would look like that: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 worth up front, people will continue to cover for.Writers do so with books.

They record a song and then can sell it the remainder of their lives to produce residual income.Their time working after the initial investment has gone to zero.The ultimate passive residual income model goes away from trading our time for money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there is someone who's 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 informative post spend his day to day hours working on each of these businesses, but he still earns income from them. If the companies do well, he can well.Warren Buffett is another shining example. Hes made Berkshire Hathaway that brings in income such as 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 that pays dividends, and each month or quarter, he receives paid.The more stocks you buy, the larger that residual income becomes more. To 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 enormous companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook empire that brings in 5-figures a month Discover More 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 start earning passive residual income, you need to find something that can be duplicated. One that doesnt have to be constructed 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 some applications, write an ebook, or create a product that we are looking for. Then give people 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 eliminate the create painting and are going back and forth between sell Source painting and earn money.In the example of an ebook, the first cycle would look like this:But after the first cycle, then write ebook is removed.

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With every dollar spent, you earn a point which can build to a level at which you can purchase goods, or even take a trip.This isnt ideal for building an income snowball, but this is the ultimate 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 got some knowledge that you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is currently in demand, which means that there are other folks out there who want to know too.Sit down and write an ebook.