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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 typical employee, this would be their disposable income. Theyve gotten their paycheck. Then paid the monthly expenses and have some money leftover to do exactly 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 (expense of operating assets * cost of funds )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 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 cost to operate asset.Corporate America considers time as a portion of their bills paid before theyre paid.Combining both, we get a formula for passive residual income which would look like that:Residual Income Net Income (Time Working + Expenses)By getting time working down to zero and 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 make something of worth , up front, people will continue to pay for.Writers do this with books.
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The Virgin brand has grown to airlines, mobile phones, listing labeland on and Extra resources on.Mr. Branson doesnt actually spend his day daily hours working on each of these businesses, but he earns income from them. If 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 of a stock that pays dividends, and every month or quarter, he gets paid.The more shares you buy, the bigger that residual income becomes. On the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are two owners of enormous companies, but what about the little 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 able to write them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design a few applications, write an ebook, or create a product that we are looking for. Then give individuals the capacity to download it while you get paid to sleep.This way, the product only needs to be built once. After the initial cycle, we eliminate the make 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:However after the first cycle, then write ebook is removed.
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With every dollar spent, you earn a point which can build to a level at which you can purchase products, or even take a trip.This isnt ideal for building an income snowball, but this really is the greatest guide to residual income so weve got to pay all our bases.Speaking of examples, 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 compose an ebook.Whatever youre teaching is currently in demand, which means there are different people out there who want to know too.Sit down and write an ebook.