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What is Residual IncomeAt its most basic level, residual income is the income earned after all the bills 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 exactly 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 (cost 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 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 compensated for. Were trading time for money.In the corporate finance formula, our time could be a portion of the charge 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 that would look like that: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 create something of valueup front, people will continue to cover for.Writers do this with books.

They set a song and then are able to sell it the rest of their lives to make 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 places an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there's someone who is earning residual passive income.

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The Virgin brand has grown to airlines, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day to day hours working on each of these businesses, but he earns income from them. When the companies do well, he does 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 mostly to dividend paying stocks, Mr.

He buys a share blog here 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 roughly $62 million dollars per year on dividend payments. Thats a huge income snowball.Now those are two owners of enormous companies, but what about the little guysSteve Scott is a prime 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 fast 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 built every time.The internet has made earning residual income so substantially easier.Digital products are the simplest form of earnings.

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

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With each dollar spent, you earn a point that can build to a level where you can purchase products, or even have a trip.This isnt perfect for building an income snowball, but that really is the ultimate lead to residual income so weve must cover all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little 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 already in demand, which means there are other people out there who want to know too.Sit down and write an ebook.