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What is Residual IncomeAt its simplest level, residual income is the income earned after each of the invoices and expenses are paid.For the average employee, 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 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 * cost of capital)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 compensated for. Were trading time for money.In the corporate finance formula, our time would be part of the 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 seem 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 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 create something of worth up front, that people will continue to pay for.Writers do so with books.

They set a song and then can sell it the rest of their lives to produce residual income.Their time working following the initial investment has gone to zero.The ultimate passive residual income model moves 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 is 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 each of those businesses, but he earns income from websites them. When the companies do well, he does 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 of his investments.By sticking mainly 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 shares you purchase, the bigger that residual income becomes. 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 massive companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures a month from ebook sales.Hes able to compose them quickly on subjects that 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 a product which can be duplicated. One that doesnt have to be constructed every time.The internet has made earning residual income so much easier.Digital goods are the simplest type of earnings.

No manufacturing that needs to take place.Design a few software, write an ebook, or produce a product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, the product only needs to be built once. After the first cycle, we eliminate the create painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the initial cycle could look like this:However after the initial cycle, then write ebook is removed.

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With each dollar spent, you earn a point which can build to a level where you can purchase products, or even take a trip.This isnt perfect for building an income snowball, but that is the ultimate guide 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 coated this one a bit already.If youve acquired some knowledge which you find yourself teaching friends and family around, and it's time to compose an ebook.Whatever youre teaching is currently in demand, which means there are other folks out there who want to know too.Sit down and write an ebook.