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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 average worker, 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 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 * price 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 compensated for. Were trading time for money.In the corporate finance formula, our time would be a portion of their charge to operate asset.Corporate America considers time as part of the invoices paid before theyre paid.Combining both, we get a formula for passive residual income that would look like that: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 valueup front, that people will continue to pay for.Writers do this with books.
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The Virgin brand has grown to airlines, mobile phones, listing labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of these businesses, but he 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 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 receives paid.The more stocks you buy, the bigger that residual income becomes. On the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are two owners of enormous companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has built an ebook that brings in 5-figures per month from ebook sales.Hes able to compose them quickly on topics people are looking for.
No manufacturing that needs to take a fantastic read place.Design some applications, write an ebook, or produce a new product that people are looking for. Then give people 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 remove the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle could look like this:However after the initial cycle, then write ebook is eliminated.
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With each dollar spent, you earn a point that can build to a level where you can purchase products, 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 got to cover our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a bit already.If youve acquired some knowledge which you find yourself teaching friends and family about, its time to compose an ebook.Whatever youre teaching is already in demand, which means there are different folks out there who want to know too.Sit down and write an ebook.