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What's Residual IncomeAt its simplest level, residual income is the income earned after all the invoices 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 do exactly what they want.In the corporate world, the definition is a bit 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 * 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 exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time could be a portion of the cost to function 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 which would seem 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 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 make something of value, up front, people will continue to cover for.Writers do this with books.

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

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The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day to day hours working on each of these 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 his investments.By sticking mostly to dividend paying stocks, Mr.

He purchases a share of a stock which pays dividends, and every month or quarter, he gets paid.The more shares you buy, the larger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars a 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 write them quickly on topics 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 a product that can be duplicated. One that doesnt need to be constructed every time.The internet has made earning residual 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 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 eliminate the create painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the initial cycle would look like this:However after the first cycle, write ebook is eliminated.

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With each dollar spent, you earn why not try here a point that can build to a level at which you can buy goods, or even take a trip.This isnt ideal for building an income snowball, but that really is the ultimate lead to residual income so weve must cover our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little already.If youve got some knowledge that 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 different people out there who want to know too.Sit down and write an ebook.