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What is Residual IncomeAt its simplest level, residual income is the income earned after all the bills and expenses are paid.For the typical employee, 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 a bit different.
You can call this passive residual income.Residual Income FormulaFor corporate America, the formula looks like this:Residual Income net operating income (expense 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 out of 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 paid for. Were trading time for money.In the corporate finance formula, our time would be part of their charge to operate asset.Corporate America considers time as a portion of the invoices paid before theyre paid.Combining the two, we get a formula for passive residual income that 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 eventual residual income model means youve got to make something of valueup front, people will continue to pay for.Writers do this with books.
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The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt really spend his day daily hours working on each of those businesses, but he still earns income from them. When the companies do well, he does well.Warren Buffett is another shining example. Hes made 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.
He buys a share of a stock that pays dividends, and each month or quarter, he gets paid.The more shares you purchase, the larger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now those are two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings in 5-figures per month from ebook sales.Hes able to write them fast on topics that people are looking for.
No manufacturing that needs to take place.Design some applications, write an ebook, or create a product that people are looking for. Then give people the capacity to download it while you get paid to sleep.This manner, the product only needs to be built once. Following the first cycle, we eliminate the create 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, write ebook is eliminated.
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With each dollar spent, you earn a point which can build into a level where you can purchase goods, or even take a trip.This isnt ideal for building an income snowball, but that really is the greatest lead to residual income so weve got to cover 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 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 there are other folks out there who want to know too.Sit down and write an ebook.