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What is Residual IncomeAt its simplest level, residual income is the income earned after all 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 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 (cost 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 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 part of the cost to operate asset.Corporate America considers time as part of their bills paid before theyre paid.Combining both, we get a formula for passive residual income which 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 eventual residual income model means youve got to make something of worth , up front, 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 actually spend his day daily hours working on each of those businesses, but he earns income from them. When 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 mostly to dividend paying stocks, Mr.
He purchases a share of a stock which pays dividends, and each month or quarter, he gets paid.The more stocks you purchase, the bigger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those are two owners of enormous companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has assembled an ebook empire that brings in 5-figures per month from ebook sales.Hes able to compose them fast on topics that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or produce a new product that people are looking for. Then go to this site give people the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. Following the first 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 initial cycle would look like this:But after the initial cycle, write ebook is removed.
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With every dollar spent, you earn a point that can build into a level at which you can purchase goods, or even take a trip.This isnt perfect for building an income snowball, but that is the greatest lead 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 covered this one a bit already.If youve got some knowledge which you find yourself teaching friends and family around, check out here and its time to compose 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.