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What is Residual IncomeAt its most basic level, residual income is the income earned after all the invoices and expenses are paid.For the typical worker, 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 (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 require 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 a portion of the charge to function asset.Corporate America considers time as a portion of the bills 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 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 eventual 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, mobile phones, record labeland on and on.Mr. Branson doesnt really spend his day daily hours working on each of these 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 like Richard Branson, but Buffett also earns passive residual income from all his investments.By sticking mostly to dividend paying stocks, Mr.
He purchases a share of a stock which pays dividends, and each month or quarter, he gets paid.The more stocks you buy, the larger that residual income becomes more. On the point where Warren Buffett earns about $62 million dollars a year on dividend payments. Thats a massive income snowball.Now these are just two owners of enormous companies, but what about the small guysSteve Scott is a choice passive residual income example.Steve has built an ebook empire that brings in 5-figures per month out of ebook sales.Hes capable to write 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 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 remove the create painting and are going back and forth between sell painting and earn money.In the example 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 every dollar spent, you earn a point that can build into a level where you can purchase goods, or even take a trip.This isnt perfect for building an income snowball, but this really is the ultimate guide to residual income so weve must cover 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 about, it's time to write an ebook.Whatever youre teaching is currently in demand, which means there are other folks around who want my website to know too.Sit down and write an ebook.