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What's Residual IncomeAt its simplest level, residual income is the income earned after each of the bills and expenses are paid.For the average worker, 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 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 (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 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 exactly what were compensated 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 part of their invoices paid before theyre paid.Combining both, we get a formula for passive residual income that would look 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 with: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 value, up front, that people will continue to pay for.Writers do so with books.

They set a song and then are able to sell it the remainder of their lives to produce residual income.Their time working after the initial investment has gone to zero.The ultimate passive residual income model goes away from trading our time to get money. It puts an emphasis on creating value for others.Residual Income ExamplesName any musician or writer and there's someone who is earning residual passive income.

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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 earns income from them. If the companies do well, he can 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 of his investments.By sticking mostly to dividend paying stocks, Mr.

He purchases a share of a stock that pays dividends, and my company each month or quarter, he receives paid.The more stocks you purchase, the larger that residual income becomes. On the point where Warren Buffett earns about $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 little guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook empire that brings in 5-figures a month from ebook sales.Hes able to compose them quickly on topics 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 which can be duplicated. One that doesnt need to be built every time.The internet has made earning residual passive income so much easier.Digital goods are the simplest form of earnings.

No manufacturing that needs to take place.Design some software, write an ebook, or produce a new product that we are looking for. Then give people the capacity to download it while you get paid to sleep.This manner, the item only needs to be built once. After the first 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 initial cycle would look like this:But after the initial cycle, then write ebook is removed.

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With each dollar spent, you earn a point which can build into a level where you can purchase products, or even have a trip.This isnt ideal for building an income snowball, but that really is the greatest guide to residual income so weve must cover all our bases.Speaking of examples, lets look at a few.Residual Income Ideas and OpportunitiesWrite an EbookWeve coated this one a bit 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 already in demand, which means there are different people around who want to know too.Sit down and write an ebook.