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What's Residual IncomeAt its most basic level, residual income is the income earned after each of the invoices and expenses are paid.For the average employee, this would be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to get exactly what they want.In the corporate world, the definition is a bit 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 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 exactly what were paid for. Were trading time for money.In the corporate finance formula, our time could be a portion of the cost to function asset.Corporate America considers time as part of the bills paid before theyre paid.Combining both, we get a formula for passive residual income that 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 create something of valueup front, people will continue to cover for.Writers do so with books.
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The Virgin brand has grown to airlines, cell phones, listing labeland on and on.Mr. Branson doesnt actually spend his day daily hours working on each of these businesses, but he still earns income from them. When 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 mainly to dividend paying stocks, Mr.
He buys a share of a stock which pays dividends, and every month or quarter, he gets paid.The more stocks you purchase, the bigger that residual income becomes. On the view it now point where Warren Buffett earns roughly $62 million dollars a year on dividend payments. Thats a massive income snowball.Now those are 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 from ebook sales.Hes capable to write them fast on topics that people are looking for.
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 ability to download it while you get paid to sleep.This way, the item only needs to be built once. Following the first cycle, we eliminate the make painting and are going back and forth between market painting and earn money.In the illustration of an ebook, the initial cycle could look like this:However after the first cycle, write ebook is eliminated.
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With each dollar spent, you earn a point that can build to a level where you can purchase goods, or even take a trip.This isnt perfect 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 acquired some knowledge which you find yourself teaching friends and family around, and its time view website to compose an ebook.Whatever youre teaching is already in demand, which means there are other people out there who want to know too.Sit down and write an ebook.