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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 worker, this would be their disposable income. Theyve gotten their own 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 could 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 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.
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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 a portion of their cost 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 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 create something of worth up front, people will continue to cover 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 to day hours working on all those businesses, but he still earns income from them. When the companies do well, he can 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 his investments.By sticking mostly to dividend paying stocks, Mr.
He purchases a share of a stock that pays dividends, and every month or quarter, he gets paid.The more stocks you buy, the bigger that residual income becomes. To 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 enormous companies, but what about the small guysSteve Scott is a prime passive residual income example.Steve has built an ebook empire that brings in 5-figures per month out of ebook sales.Hes able to compose them quickly on topics that people are looking for.
No manufacturing that needs to take place.Design a few software, 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. 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:But after the first cycle, write ebook is removed.
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With every dollar spent, you earn a point which can build to a level where you can purchase goods, or even have a trip.This isnt perfect for building an income snowball, but this really is the ultimate lead 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 bit already.If youve got some knowledge which you find yourself teaching friends and family about, it's time to write an ebook.Whatever youre teaching is already in demand, which means that there are other folks around who want to know too.Sit down and write an ebook.