A residual income stream will be earning you money even when you’re not working “on the clock”. Owning a rental unit, collecting a royalty or investing in a savings and investment program are examples of this type of income, which is also called “passive income”.
What IS Residual Income? And How Does It Work?
What if you were able to generate income while not working – trading HOURS for DOLLARS? This money is called residual, or recurring, income. This is the sort of thing that can happen after you put a lot of time, effort and sometimes money into an opportnity (or “business”) to continue to get paid for the work months or years after it’s done. (Jobs are considered to be linear income. This income is directly related to the number of hours you work. If you work 40 hours, you get paid for 40 hours of work.) Once you set up your business to earn residual income, you continue to make those dollars while doing other stuff – maybe even starting a new business to generate even more residual income!
Types of Residual Income
Some example sources include:
- Royalties from intellectual property, such as books and patents
- Subscriptions, advertisements, donations or affiliate links from your blog or website
- Transferring the rights to a song you recorded, a book you wrote, a software program you created or a gadget you invented to a company agreeing to pay you a percentage of each copy of your work sold
- Purchasing an office or apartment building and leasing or renting out the properties
- A savings and investment program that earns interest
- E-book sales
- Stock photography royalties
The Money Just Keeps Rolling In?
The ideal residual income stream will produce money 24 hours a day, 7 days a week and you don’t have to personally market or interact with the business in any way. All you “need” to do is watch your bank account grow.
But that’s still kind of like a fairytale. You will have to put in some effort to continue receiving this residual income on the business you started. Working online makes it easy and scalable, so you might spend some time to figure out how to expand your biz. Marketing your online sales through social media and your network will help earn you much more money. But you just won’t have to work at it as your full time job or anything crazy like that. Think of it as a part time job that can potentially bring in full time pay.
Advantages to Residual Income
- You do have the potential to be financially independent if your residual income produces enough money.
- Having residual income allows you to do more important things with your time. Whether that’s a hobby or another job, making money from your residual income stream won’t be the primary focus of your life.
- No matter what, you will have a constant flow of income (however large or small it may be). This is critical if you get injured or sick, can’t work because of another emergency, or if you just want to take an extended vacation.
- You will make money no matter where you reside, unlike a linear income which ties you down to your position.
Of course, before the money starts rolling in you will probably have to put a lot of time, effort and money into the business or project. You’ll need a lot of patience and determination to see the residual income in the future. Instant gratification shouldn’t be expected when it comes to residual income.