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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 typical employee, this could 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 a bit 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 require a 500 chunk from it youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.

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 part of the charge to operate asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining the two, we get a formula for passive residual income that would look like this:Residual Income Net Income (Time Working + Expenses)By getting the time working down to zero and also 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 make something of worth , up front, that people will continue to cover for.Writers do this with books.

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They set a song and then are able to sell it the remainder of their lives to make 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 for money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who is earning residual passive income.

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

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He buys a share of a stock which pays dividends, and every month or quarter, he gets paid.The more shares you buy, the bigger that residual income becomes more. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are just two owners of massive companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings in 5-figures per month out of ebook sales.Hes able to write 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 something which can be duplicated. One that doesnt have to be built 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 a few software, 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 painting and earn money.In the example of an ebook, the first cycle could look like this:But after the initial cycle, write ebook is eliminated.

With each dollar spent, you earn content a point which can build into a level at which you can purchase products, or even have a trip.This isnt perfect for building an income Recommended Reading snowball, but that really 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 EbookWeve coated this one a bit 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 there are other people out there who want to know too.Sit down and write an ebook.