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What's Residual IncomeAt its simplest level, residual income is the income earned after all the bills and expenses are paid.For the average worker, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do 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 so youre left with a net income of $2,500. That month, youve also got a mortgage payment for $1,000.
Our time is worth something and we shouldnt discount it.For a normal 9 to 5 job, thats exactly what were compensated for. Were trading time for money.In the corporate finance formula, our time would be part of the cost 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 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 ultimate residual income model means youve got to create something of worth , up front, that people will continue to pay for.Writers do this with books.
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They record a song and then are able to market it the rest of their lives to produce residual income.Their time working after the initial investment has gone to zero.The ultimate passive residual income model moves 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's someone who is earning residual passive income.
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. 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 mainly to dividend paying stocks, Mr.
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He purchases a share of a stock that pays dividends, and each month or quarter, he gets paid.The more stocks you buy, the bigger that residual income becomes more. On the point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now those are just two owners of massive companies, but what about the little guysSteve Scott important source is a choice passive residual income example.Steve has assembled an ebook empire that brings in 5-figures per month out of ebook sales.Hes capable to write them quickly on subjects that people are looking for.
To earn more money, youd need to keep creating more paintings.To start earning passive residual income, you need to find a product that can be replicated. One that doesnt have to be built every time.The internet has made earning residual passive income so much easier.Digital products are the easiest form of earnings.
No manufacturing that needs to take place.Design some applications, write an ebook, or produce a new product that we 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 eliminate the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle would look like this:But after the initial cycle, then write ebook is eliminated.
With every dollar spent, you earn a point that can build to a level where you can buy goods, or even have a trip.This isnt ideal for building an income snowball, but this is the ultimate lead my company to residual income so weve must cover all our bases.Speaking of illustrations, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a little already.If youve got some knowledge that you find yourself teaching friends and family about, it's time to compose an ebook.Whatever youre teaching is already in demand, which means there are different people out there who want to know too.Sit down and write an ebook.