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What's Residual IncomeAt its most basic level, residual income is the income earned after each of the bills and expenses are paid.For the average employee, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to get 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 (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 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 compensated for. Were trading time for money.In the corporate finance formula, our time would be part of their charge to function asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining both, we get a formula for passive residual income which would seem like this:Residual Income Net Income (Time Working + Expenses)By getting the time working down to zero and also 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 worth up front, people will continue to cover for.Writers do so with books.
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The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt actually spend his day to day hours working on each of those businesses, but he 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 official source income from all of his investments.By sticking mainly to dividend paying stocks, Mr.
He buys a share of a stock that pays dividends, and every month or quarter, he receives paid.The more stocks you purchase, the larger 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 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 capable to compose them quickly on topics that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a product that we are looking for. Then give individuals the capacity 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 make 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:But 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 buy goods, or even take a trip.This isnt perfect for building an income snowball, but this really is the ultimate lead to residual income so weve must pay 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 acquired some knowledge that you find yourself teaching friends and family around, and its time to compose an ebook.Whatever youre teaching is already in demand, which means there are different people around who want to know too.Sit down and write an ebook.