Residual Income

What is residual income? Is it the kind of income that you want?

It is one way to earn money passively - it is passive because it does not require your direct involvement. You may be familiar with several ways of earning money passively, such as owning rental property, or receiving royalties on an invention or creative work.

Residual Income is income that continues to be generated after your initial effort.

Think about that definition for a moment. Most people focus on earning linear income. Linear income is directly proportional to the number of hours invested in it, such as 40 hours of pay for 40 hours of work.

One of the great advantages of residual income (RI) is that you continue making money from your initial efforts, while gaining time to devote to other things.

Some examples of ways to generate RI are:

An insurance agent who gets commission every year when a customer renews his policy.

A network marketing or direct sales rep's income from her direct customers when they reorder product every month.

An aerobics instructor who produces a video and sells it at the gyms where she teaches.

A marketing consultant who creates a workbook and sells it in e-book format on the Internet.

A photographer who makes his photos available through a stock photography clearinghouse and gets paid a royalty whenever someone buys one of his images.

The above examples are just a few of the many ways a person can generate RI.

A point worth mentioning here is that RI is different from recurring income. Recurring income still requires your involvement to earn the income. For example: a coach or consultant on a monthly retainer, or a caterer who delivers lunch every Monday to the local school board. Can you see how with recurring income a person tends to be tied down and has limits on his earning capacity based upon his own capacity?

While we're on the topic of residual income (RI), let's look at leveraged income.

Leveraged income is when you leverage the work of other people to create income for yourself. Some examples of leveraged income are:

An e-book author selling her e-book through affiliates who promote the product.

A network marketer who builds a down line and receives commissions on the sales made by people in his down line.

A general contractor who makes a profit margin on the work done by sub-contractors.

Franchising a business model to other entrepreneurs.

There are many ways a person can generate leveraged income. The key: Make money off of other people's labor, rather than primarily your own.

Note that leveraged income may or may not also be RI. When you combine the two, that's even better.

How are you going to leverage your income in such a way that it provides you a residual income stream? Look at the home based business ideas section of this web site for assistance.

But keep in mind that what is more important than whether or not you are creating a leveraged or residual income stream is that you are passionate about what you're doing. So, if you see a home business you could build that is exciting to you, but will not provide leveraged or residual income - go for it!

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