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What is Residual IncomeAt its simplest level, residual income is the income earned after all the bills and expenses are paid.For the average employee, this could 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 a bit 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 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 exactly what were paid for. Were trading time for money.In the corporate finance formula, our time could be part of the cost to operate asset.Corporate America considers time as part of their 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 make something of worth , up front, that people will continue to cover 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 actually spend his day to day hours working on all these businesses, but he still earns income from them. When 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 his investments.By sticking mainly to dividend paying stocks, Mr.
He purchases a share of a stock that pays dividends, and every month or quarter, he receives paid.The more shares you buy, the larger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now those are look at this now just two owners of massive companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook empire that brings in 5-figures per month out of ebook sales.Hes capable to compose them quickly on topics people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or produce a new product that we are navigate to these guys 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 initial 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 initial cycle could look like this:But after the initial cycle, write ebook is removed.
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With every dollar spent, you earn 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 greatest guide 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 acquired some knowledge that you find yourself teaching friends and family about, its time to compose an ebook.Whatever youre teaching read more is already in demand, which means there are different folks out there who want to know too.Sit down and write an ebook.