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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 average worker, this would 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 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 * price of funds )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 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 would be part of the cost to operate asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining both, we get a formula for passive residual income that would seem like this: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 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 create something of value, up front, that people will continue to pay for.Writers do so 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 after the initial investment has gone to zero.The ultimate passive residual income model goes away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is 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 such as Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mainly to dividend paying stocks, Mr.
He buys a share of a stock that pays dividends, and every month or quarter, he receives paid.The more stocks you buy, the bigger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are 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 fast on subjects that people are looking for.
To earn more money, youd need to keep creating more paintings.To begin 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 easiest type of earnings.
No manufacturing that needs to take place.Design a few applications, write an ebook, or create a product that people are looking for. Then give individuals the ability to download click to investigate it while you get paid to sleep.This way, the item only needs to be built once. After the first cycle, we eliminate the create painting and are going back and forth between sell painting and earn money.In the illustration of an ebook, the first cycle could look like this:But after the first cycle, then write ebook is removed.
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With each dollar spent, you earn a point which can build to a level at which you can purchase goods, or even have a trip.This isnt perfect for building an income snowball, but this is the ultimate lead to residual income so weve must pay 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 acquired some knowledge which you find yourself teaching friends and family around, and it's time to write an ebook.Whatever youre teaching is currently in demand, which means there are other people out there who want to know too.Sit down and write an ebook.