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What is Residual IncomeAt its most basic level, residual income is the income earned after each of the invoices 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 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 * price 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 compensated for. Were trading time for money.In the corporate finance formula, our time could be part of the charge to operate asset.Corporate America considers time as part of the invoices paid before theyre paid.Combining both, we get a formula for passive residual income which would look like this:Residual Income Net Income (Time Working + Expenses)By getting the 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 value, up 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 actually spend his day to day hours working on all those businesses, but he earns income from them. When the companies do well, he does 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 his investments.By sticking mostly to dividend paying stocks, Mr.
He purchases a share of a stock which pays dividends, and each month or quarter, he receives paid.The more stocks you buy, the bigger that residual income becomes. To the point where Warren Buffett earns roughly $62 million dollars per year on dividend payments. Thats a massive income snowball.Now these are just two owners of massive companies, but what about the little guysSteve Scott is a prime passive residual income example.Steve has assembled an ebook that brings in 5-figures a month from ebook sales.Hes capable to compose them quickly on subjects that people are looking for.
No manufacturing that needs to take place.Design a few software, write an ebook, or create a new product that we are looking for. Then give individuals the ability to download it while you get paid to sleep.This way, the item only needs to be built once. Following the initial cycle, we remove the make painting and are going back and forth between market painting and earn money.In the example of an ebook, the first cycle could look like this:But after the first cycle, write ebook is removed.
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With each dollar spent, you earn a point that can build to a level at which you can buy goods, or even have a trip.This isnt ideal for building an income snowball, but that really is the greatest lead 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 bit already.If youve got some knowledge which you find yourself teaching friends and family about, its time to write an ebook.Whatever youre teaching is currently in demand, which means that there are other folks around who want to know too.Sit down and write an ebook.