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What's Residual IncomeAt its simplest level, residual income is the income earned after all the bills and expenses are paid.For the typical worker, this would be their disposable income. Theyve gotten their 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 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 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 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 compensated for. Were trading time for money.In the corporate finance formula, our time could be part of their cost to function 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 which would look like this:Residual Income Net Income (Time Working + Expenses)By getting the 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 ultimate residual income model means youve got to create something of valueup front, people will continue to pay for.Writers do so with books.

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The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day to day 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 such as 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 that pays dividends, and each month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are just two owners of enormous 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 from ebook sales.Hes able to compose them fast on topics that people are looking for.

No manufacturing that needs to take place.Design a few 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 product only needs to be built once. Following the first cycle, we remove the make painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the initial cycle could look like this:However after the first cycle, then write ebook is eliminated.
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With each dollar spent, you earn a point that can build to a level at which you can purchase products, or even take a trip.This isnt their explanation perfect for building an income snowball, but that is the ultimate lead to residual income so weve must cover 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 got some knowledge which you find yourself teaching friends and family about, its time to compose an ebook.Whatever youre teaching is currently in demand, which means there are different folks around who want to know too.Sit down and write an ebook.