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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 average employee, this would be their disposable income. Theyve gotten their 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 (expense of operating assets * price 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 could be a portion of the cost to operate asset.Corporate America considers time as a portion of the invoices paid before theyre paid.Combining both, we get a formula for passive residual income that 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 ultimate residual income model means youve got to create something of worth up front, that people will continue to pay for.Writers do so with books.

They set a song and then are able to market it the remainder of their lives to make 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 to get money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who is 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 really spend his day to day hours working on all those businesses, but he still 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 such as have a peek at this site Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.

He buys a share of a stock which pays dividends, and each month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these 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 empire that brings in 5-figures a month from ebook sales.Hes able to compose them fast on subjects 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 have to be constructed every time.The internet has made earning residual passive income so much easier.Digital goods are the simplest form of earnings.

No manufacturing that needs to take place.Design some applications, write an ebook, or create a new product that we are looking for. Then give people 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 eliminate the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first cycle would look like this:But after the initial cycle, then write ebook is eliminated.

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