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What is Residual IncomeAt its simplest 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 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 (cost of operating assets * price of funds )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 could be a portion of their cost to operate asset.Corporate America considers time as a portion 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 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 valueup front, that people will continue to pay for.Writers do this with books.
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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 daily hours working on all those businesses, but he 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 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 that pays dividends, and each month or quarter, he receives paid.The more stocks you purchase, the larger that residual income becomes. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now those are just 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 capable to compose them fast on topics people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a new product that we are looking for. Then give people the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. Following the first cycle, we remove the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the first 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 that can build to a level where you can buy products, or even have a trip.This isnt perfect for building an income snowball, but that is the greatest guide 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 Get More Information EbookWeve coated this one a bit already.If youve got some knowledge which 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 different folks out there who want to know too.Sit down and write an ebook.