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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 average worker, this could be their disposable income. Theyve gotten their own paycheck. Then paid the monthly expenses and have some money leftover to do 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 capital)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 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 exactly what were paid for. Were trading time for money.In the corporate finance formula, our time would be part of the charge to function asset.Corporate America considers time as a portion of their invoices paid before theyre paid.Combining the two, 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 also 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 valueup front, that 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 to day hours working on all those businesses, but he still earns income from them. If the companies do well, he can well.Warren Buffett is another shining example. index Hes made 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 purchases a share of a stock which pays dividends, and every month or quarter, he gets paid.The more stocks 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 huge income snowball.Now these are just 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 fast on topics people are looking for.
No manufacturing that needs to take place.Design some software, write an ebook, or create a new product that people are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, the product only needs to be built once. Following the initial cycle, we remove the create painting and are going back and forth between market painting and earn money.In the example of an ebook, the initial cycle could look like this:However after the initial cycle, then write ebook is eliminated.
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With every dollar spent, you earn a point which can build to a level at which you can purchase goods, or even take a trip.This isnt perfect for building an income snowball, but this is the greatest lead to residual income so weve got to pay 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 got some knowledge that you find yourself teaching friends and family about, its time 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.