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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 worker, 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 * 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 what were compensated for. Were trading time for money.In the corporate finance formula, our time could be part of the charge to operate asset.Corporate America considers time as a portion of their bills paid before theyre paid.Combining the two, we get a formula for passive residual income which would seem 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 :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.
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The Virgin brand has grown to airlines, cell phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on all these 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 like Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mainly to dividend paying stocks, Mr.
He purchases a share of a stock which pays dividends, and every month or quarter, he receives paid.The more stocks you purchase, the larger that residual income becomes more. On the point where Warren Buffett earns roughly $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 little guysSteve Scott is a choice passive residual income example.Steve has built an ebook that brings in 5-figures a month out of ebook sales.Hes able to compose them quickly on topics people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or create 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 initial cycle, we remove the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the first cycle could 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 to a level at which you can buy products, or even have a trip.This isnt perfect for building an income snowball, but this is the greatest 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 covered this one a bit already.If youve got some knowledge that 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 that there are other folks out there who want to know too.Sit down you could try this out and write an ebook.