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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 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 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 * 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 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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time would be part of their cost to operate asset.Corporate America considers time as part of their bills paid before theyre paid.Combining both, we get a formula for passive residual income that would seem like that: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 pay for.Writers do so with books.
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The Virgin brand has grown to airlines, cell important site phones, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on each of 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 like 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 every month or quarter, he gets paid.The more stocks you buy, the bigger that residual income becomes. On the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now those are two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings in 5-figures per month from ebook sales.Hes able to write them quickly on topics people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. Following the initial cycle, we eliminate the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle could look like this:However after the first cycle, write ebook is eliminated.
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With each dollar spent, you earn a point which can build to a level where you can purchase goods, or even have a trip.This isnt ideal for building an income snowball, but that is the greatest lead to residual income so weve got to cover our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a bit already.If youve got some knowledge that you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is currently in demand, which means there are different people out there who want to know too.Sit down and write an ebook.