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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the invoices and expenses are paid.For the average 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 (expense of operating assets * price of capital)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 paid for. Were trading time for money.In the corporate finance formula, our time would be a portion of the cost to function asset.Corporate America considers time as part of their 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 the 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 ultimate residual income model means youve got to make something of value, up front, that people will continue to cover for.Writers do this with books.

They record a song and then are able to sell it the rest of their lives to make residual income.Their time working following the initial investment has gone into zero.The ultimate passive residual income model moves away from trading our time for money. It places an emphasis on creating value for others.Residual Income ExamplesName any musician or writer 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 to day hours working on all those 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 that pays dividends, and every month or quarter, he gets paid.The more stocks you purchase, the larger that residual income becomes more. To the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now these are just two owners of enormous companies, but what about the little guysSteve Scott is a choice passive residual income example.Steve has built blog an ebook empire that brings in 5-figures a month from ebook sales.Hes able to write them quickly on topics 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 something which can be duplicated. One that doesnt have to be built every time.The internet has made earning residual income so substantially easier.Digital products are the simplest form of earnings.

No manufacturing that needs to take place.Design some applications, write an ebook, or create a product that people are looking for. Then give people the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. After the initial cycle, we eliminate the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle would look like this:But after the first cycle, write ebook is removed.

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With every dollar spent, you earn a point which can build into a level where you can buy goods, or even take a trip.This isnt ideal for building an income snowball, but this is the greatest guide to residual income so weve got advice to pay our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve acquired some knowledge that 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 that there are different people out there who want to know too.Sit down and write an ebook.