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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 could 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 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 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 exactly what were paid for. Were trading time for money.In the corporate finance formula, our time would be a portion of their cost to function asset.Corporate America considers time as a portion of the bills paid before theyre paid.Combining the two, we get a formula for passive residual income which would seem like this:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and also 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 worth , up 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, record labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of those businesses, but he still earns income from them. When the companies do well, he can well.Warren Buffett is another shining example. Hes created Berkshire Hathaway that brings in income such as Richard Branson, but Buffett also earns passive residual income from all of his investments.By sticking mostly to dividend paying stocks, Mr.
He buys a share of a stock that pays dividends, and each month or quarter, he gets paid.The more stocks you buy, the larger that residual income becomes. To the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a huge income snowball.Now these are just two owners of massive companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures a month out of ebook sales.Hes capable to compose them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that we are looking for. Then give people the ability to download it while you get paid to sleep.This manner, the item only needs to be built once. After the initial cycle, we remove the create painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first cycle would look like this:But after the initial cycle, then write ebook is removed.
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With each dollar spent, you earn a point that can build into a level at which you can buy products, or even have a trip.This isnt ideal for building an income snowball, but that is the ultimate guide to residual income so weve must pay all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve view website covered this one a bit already.If youve acquired some knowledge that you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is currently in demand, which means there are different folks out there who want to know too.Sit down and write an ebook.