Wednesday, January 19, 2011

What is Residual Income?

Residual income is when you continue to profit and earn money for actions that have since been completed.  Rather than getting paid linear income, which is money earned per hour of work, you continue getting paid long after the work is done. 

I designed this chart to illustrate the comparison. Notice the continual rise of the residual income over time, even though less effort is being put in, versus the linear income, where income doesn't change unless time and effort are increased.  

Some benefits of residual income are:

  • Financial Independence:  Getting paid for weeks, months, and even years for a job you completed in the past is an excellent way to pay off debt, make investments, or add to savings. 
  • Time:  You still receive money, while not spending the time working!  You can then take that time and use it for other things like family time, vacations, or even generating more residual income. 
  • Get paid for the rest of your life:  Compared to linear income, residual income makes sense.  With an honest hard working job you get paid once for that work, but with residual income, you get paid continuously for a long period of time, possibly even for life!
Some ways to earn residual income include:
  • Having rental properties with paid mortgages; the rent is your residual income
  • Writing a book, a song, or acting; the profits made from book sales, music sales, or money drawn from TV shows, movies, or commercials are your residuals
  • An investment or savings plan that pays you residuals in the form of interest or dividends
  • Referral, affiliate, or associate programs; where you receive compensation for marketing and referring customers.  Some of these programs have a one-time compensation plan and a few credible ones have long term residual compensation plans. 
Those are only a few ideas of ways to earn residual income.  Some are not possibilities for everyone because they require certain skills and talents, or a large start up fee or investment.  If you have any questions about residual income please don't hesitate to contact me. 

Check back next week, I will be posting more about the benefits of residual income and about what it has done for me. 

Be sure to also visit me at my personal blog: Mommy To Two Boys


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