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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 worker, this could be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do 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 (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 require a $500 chunk out of 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 what were paid for. Were trading time for money.In the corporate finance formula, our time would be a portion of the charge 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 that would look 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 :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 valueup front, that people will continue to cover for.Writers do this with books.
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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 all those businesses, but he still earns income from them. If 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 each month or quarter, he receives paid.The more stocks you buy, the larger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars a year on dividend websites payments. Thats a huge 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 assembled an ebook empire that brings in 5-figures a month from ebook sales.Hes capable to compose them quickly on subjects people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a product that people are looking for. Then give read this article individuals the ability to download it while you get paid to sleep.This manner, the product only needs to be built once. Following the initial cycle, we eliminate the make painting and are going back and forth between sell painting and earn money.In the example of an ebook, the first cycle could look like this:But after the first cycle, write ebook is removed.
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With each dollar spent, you earn a point which can build to a level at which you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but that really is the greatest lead to residual income so weve got to pay all our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve covered this one a little already.If youve got some knowledge which you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is currently in demand, which means there are different people out there who want to know too.Sit down and write an ebook.