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What is Residual IncomeAt its most basic 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 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 (expense of operating assets * cost 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 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 paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of their charge to operate asset.Corporate America considers time as part of the bills paid before theyre paid.Combining the two, we get a formula for passive residual income that would seem like this: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 create something of value, up front, that people will continue to pay for.Writers do this with books.
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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 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 of his investments.By sticking mostly to dividend paying stocks, Mr.
He purchases a share of a stock which pays dividends, and each month or quarter, he receives paid.The more shares you buy, the bigger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. redirected here Thats a massive income snowball.Now these are two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has built an ebook that brings in 5-figures per month out of ebook sales.Hes able to write them fast on subjects that people are looking for.
No manufacturing that needs to take place.Design a few software, 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 first cycle, we eliminate the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle would 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 where you can purchase goods, or even have a trip.This isnt perfect for building an income snowball, but that really is the greatest lead to residual income so weve must cover all our bases.Speaking of examples, 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, its time to write an ebook.Whatever youre teaching is currently in demand, which means that there are different folks out there who want to know too.Sit down and write an ebook.