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What's Residual IncomeAt its most basic level, residual income is the income earned after each of the bills and expenses are paid.For the average employee, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do 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 (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 out of 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 paid for. Were trading time for money.In the corporate finance formula, our time would be a portion of the charge to operate asset.Corporate America considers time as part of the bills 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 create something of valueup front, that people will continue to cover for.Writers do this with books.

They set a song and then are able to 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 moves away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there's someone who is earning residual passive income.

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The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day to day hours working on all those businesses, but he earns income from them. If the companies do well, he does 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 his investments.By sticking mostly to dividend paying stocks, Mr.

He purchases a share of a stock that pays dividends, and every month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those are 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 sales.Hes capable to compose them quickly on topics people are looking navigate to these guys for.

To earn more money, youd need to keep creating more paintings.To begin earning passive residual income, you need to find something which can be replicated. One that doesnt need to be constructed every time.The internet has made earning residual income so substantially easier.Digital goods are the simplest type of earnings.

No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a product that people are looking for. Then give individuals the ability to my sources download it while you get paid to sleep.This manner, the product only needs to be built once. Following the first cycle, we eliminate the create painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the initial cycle her response could look like this:But after the initial cycle, write ebook is removed.

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With every dollar spent, you earn a point which can build into 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 lead to residual income so weve got to cover all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little already.If youve got some knowledge which you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is already in demand, which means that there are different folks around who want to know too.Sit down and write an ebook.