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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 typical 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 somewhat 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 * 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 what were paid for. Were trading time for money.In the corporate finance formula, our time would be a portion of the charge to function asset.Corporate America considers time as part of the bills paid before theyre paid.Combining the two, we get a formula for passive residual income which would look 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 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 worth up front, people will continue to cover for.Writers do this with books.

They record a song and then are able to sell it the remainder of their lives to produce residual income.Their time working after the initial investment has gone into 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 author and there is someone who's 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 those businesses, but he still 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 buys a share of a stock which pays dividends, and each month or quarter, he receives paid.The more stocks you purchase, the bigger that residual income becomes more. To the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a huge income snowball.Now those are just two owners of massive 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 out of ebook sales.Hes capable to write them quickly on topics that people are looking for.

To earn more money, youd need this link to keep creating more paintings.To start earning passive residual income, you need to find a product that can be duplicated. One that doesnt have to be built every time.The internet has made earning residual income so much easier.Digital goods are the simplest form of earnings.

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

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With each dollar spent, you earn a point that can build into a level at which you can purchase goods, or even have a trip.This isnt perfect for building an income snowball, but that is the ultimate guide to residual income so weve got to cover all our bases.Speaking of illustrations, 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, and its time to compose an ebook.Whatever youre teaching is currently in demand, which means there are other people around who want to know too.Sit down and write an ebook.