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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 average employee, this would be their disposable income. Theyve gotten their 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 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 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 the charge to function asset.Corporate America considers time as a portion of their bills paid before theyre paid.Combining the two, we get a formula for passive residual income that 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 :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 valueup front, people will continue to pay for.Writers do this with books.
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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 daily hours working on all those businesses, but he still earns income from them. If 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 that pays dividends, and each month or quarter, he receives paid.The more stocks you buy, the larger that residual income becomes. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are two owners of enormous 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 able to write them fast on subjects people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or create a product that people are looking for. Then give people the ability to download it while you get paid to sleep.This way, the product only needs to be built once. After the first cycle, we remove the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the initial cycle could look like this:However after the initial cycle, then write ebook is eliminated.
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With every dollar spent, you earn a point which can build into a level at which you can purchase products, or even take a trip.This isnt 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 around, and its time to compose an ebook.Whatever youre teaching is currently in demand, which means there are other folks out there who want to visit this website know too.Sit down and write an ebook.