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What is Residual IncomeAt its simplest level, residual income is the income earned after each of the bills and expenses are paid.For the typical worker, this could be their disposable income. Theyve gotten their own 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 can 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 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 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 compensated 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 part of the bills 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 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 ultimate residual income model means youve got to create something of worth , up front, that people will continue to pay for.Writers do this with books.

They record 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 into zero.The ultimate passive residual income model goes away from trading our time for money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there's 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 actually spend his day to day hours working on all 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 like Richard Branson, but Buffett also earns passive residual income from all visit this page his investments.By his response 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 stocks you purchase, the bigger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook that brings in 5-figures a month out of ebook sales.Hes capable 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 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 easiest form of earnings.

No manufacturing that needs to take place.Design a few applications, write an ebook, or produce a new product that people are looking for. Then give individuals the capacity to download it while you get paid to sleep.This way, the item only needs to be built once. Following 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 could look like this:But after the initial cycle, write ebook is removed.

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With each dollar spent, you earn a point that can build into a level where you can buy goods, or even have a trip.This isnt ideal for building an income snowball, but that really is the ultimate guide to residual income so weve must pay all our bases.Speaking of illustrations, 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 its time to write an ebook.Whatever youre teaching is currently in demand, which means that there are other people around who want to know too.Sit down and write an ebook.