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What's 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 could be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do 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 (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 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 the cost to function asset.Corporate America considers time as part of the bills paid before theyre paid.Combining both, 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 also 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 ultimate residual income model means youve got to make something of valueup front, people will continue to pay for.Writers do so with books.

They record a song and then can sell it the remainder of their lives to make residual income.Their time working following the initial investment has gone to zero.The ultimate passive residual income model goes away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there is someone his comment is here who is earning residual passive income.

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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 all these businesses, but he still earns income from them. If the companies do well, he can 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 that pays dividends, and each month or quarter, he gets paid.The more shares you buy, the bigger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars a 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 choice passive residual income example.Steve has built an ebook that brings in 5-figures a month from ebook sales.Hes able to compose them fast on subjects that people are looking for.

To earn more money, youd need additional hints to keep creating more paintings.To begin earning passive residual income, you need to find a product that can be duplicated. One that doesnt need to be constructed every time.The internet has made earning residual income so substantially easier.Digital goods are the easiest form of earnings.

No manufacturing that needs to take place.Design some software, 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 way, the item only needs to be built once. Following the first 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 first cycle, write ebook is eliminated.

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With every dollar spent, you earn a point that can build to a level at which you can buy products, or even have a trip.This isnt perfect for building an income snowball, but this really is the greatest guide to residual income so weve must cover all 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 that you find yourself teaching friends and family around, and its time to write an ebook.Whatever youre teaching is currently in demand, which means there are different folks out there who want to know too.Sit down and write an ebook.