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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 typical employee, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do exactly 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 require 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 compensated for. Were trading time for money.In the corporate finance formula, our time could be a portion of their cost to operate 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 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 with: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 value, up front, people will continue to pay for.Writers do this with books.

They set a song and then can market 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 places an emphasis on creating value for others.Residual Income ExamplesName any musician or author and there is someone who's earning residual passive income.

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The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on each of these businesses, but he earns income from them. When the companies do well, he does 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 mainly to dividend paying stocks, Mr.

He purchases a share of a stock which pays dividends, and each month or quarter, he gets 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. Thats a huge 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 built an ebook empire that brings in 5-figures a month from ebook sales.Hes able to write them quickly on subjects that people are looking for.

To earn more money, youd need to keep creating more paintings.To start earning passive residual income, you need to find a product which can be duplicated. One that doesnt need to be built every time.The internet has made earning residual income so substantially easier.Digital products are the simplest type of earnings.

No manufacturing that needs to take place.Design some applications, write an ebook, or create a new product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This way, the product only needs to be built once. Following the initial cycle, we remove the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle could look like this:However after the first cycle, write ebook is eliminated.

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With each dollar spent, you earn a point which can build to a level at which you can buy goods, or even have a trip.This isnt perfect for building an income snowball, but that really is the ultimate page lead to residual income so weve got to pay our bases.Speaking of illustrations, 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 compose an ebook.Whatever youre teaching is currently in demand, which means that there are different folks around who want to know too.Sit down and write an ebook.