What is a residual income stream?
Residual income (also called passive, or recurring, income) is income that you continue to receive over and over again after the initial work has been done, usually only once.
Contrary to an active income, a residual income stream will therefore earn you money even when you’re not very actively involved in it.
What is an active income?
An active (or linear) income is what you receive only once for a certain amount of work. Examples are wages, salaries, and solicitors’ or doctors’ fees or what professional sports stars, or movie stars receive for their performances.
You have to work over and over to earn this type of money.
Types of residual income businesses
There are a variety of residual incomes whether offline or online.
Examples of offline residual income include:
- Royalties from intellectual property, such as books, photographs, songs, and patents for a software program or any other invention
- leasing or renting out properties like offices or apartment buildings or other real estate
- earning as actor or producer from movies, TV shows, or commercials anytime they’re shown
- granting an oil company the right to drill a well on your property in exchange for a percentage of the revenue
The above residual income activities generally aren’t for the average Joe.
Types of internet residual income
On the contrary the following mainly online residual income are more attainable for the average person:
- A savings and investment or share program that earns interest or dividends
- Associate programs such as referral, reseller, affiliate, etc., that are very popular on the Internet and are generally free to join (Some associate programs only pay one-shot commissions, and others give you recurring, residual compensation for your efforts.)
- Subscriptions, advertisements, donations or affiliate links from your blog or website
- Creating and marketing your own information products
Some famous people making residual income
Warren Buffett, Bill Gates, Richard Branson, and Oprah Winfrey were not born rich. They’ve amassed huge personal fortunes through a residual income system.
It’s because Bill Gates is making business residual income that his fortune increases from year to year on the Forbes Rich List although he no longer works at Microsoft Corporation.
Once set, the residual income just keeps rolling in, right?
There is a passive income myth which surrounds both the offline and the online ways of earning.
People imagine that once set up a best residual income businesses will produce money 24 hours a day, 7 days a week, 4 weeks a month, and 12 months a year without any intervention on your part.
Nothing is far from the truth.
While you don’t have to work like before, you still will have to keep an eye on things.
Richard Branson doesn’t directly run any of his 400+ companies but he stays in daily contact with the CEOs to see how things are going and to offer direction if need be.
In the piece “Advice from a millionaire who runs 10 businesses while sailing the world with his family”, the owner is able to do that because he has managers and each is given full control of their business. Yet he stays in contact through information technology.
Concerning residual income affiliate program, the belief is that you work to build a passive income asset and then relax for the rest of your life under a coconut tree on the beach with a hat on and a fruit drink beside you.
The truth is that people find idleness extremely boring and monotonous. That’s why the rich continue to work. It may not really be about the money anymore but love for what they do.
So, as you see, you’ll have to continue putting in some work to continue receiving your residual income on the business you’ve got rolling.
Just like Richard Branson and the millionaire who travels the world, you’ll have to keep talking to your managers and representatives to keep them focused, more productive and run your businesses better.
Concerning your online residual income business opportunity, continuing to market it through social media and your network will help keep more money coming in.
But in both cases you just won’t have to work hard at it anymore just as at the beginning or as at your full time job. This time you do it like a part time job to recoup more passive income.
How to build residual or passive income
To enjoy residual income, you must have or create a product/service that people will continue to patronize on a regular basis long after you’ve created it.
In the offline example, people still buy books written years ago, the songs of artists like Michael Jackson and Bob Marley are bringing in more money after their deaths, and Bill Gates still gets paid for his inventions in the area of computers and internet.
People continue to pay rent for offices or apartment buildings or other real estate built decades and even centuries ago.
The same goes for old movies, TV shows, or commercials and oil wells
The keyword is leverage. You leverage other people’s time, money, intelligence or efforts to create a best residual income opportunity.
Richard Branson runs 400+ companies because he has CEOs in control. Idem for the traveling millionaire.
Easy residual income?
Generally, before the money starts rolling in you will have to put a lot of time, energy and money into the business or project. A dose of patience and determination are also necessary to build the residual income since there is no instant gratification here. Get rich schemes rather get your poor quickly.
Advantages of building a residual income
Just like a successful online job over a 9-5 one, a residual income has advantages over an active one. Some of them are:
- It covers you financially now and in the future, especially against eventualities like injuries, sickness, accident, etc.
- It releases your valuable time for other things like travelling around the world, developing your hobby or another income opportunity, spending more time with your family, etc.
- It pays you no matter where or when you live, quite unlike a linear income
Residual income opportunities are not all equal. The best types are often those that you have created yourself (like an infoproduct), have exclusive rights to or control in some way.
They may be harder, more time-consuming and demand money to be developed or acquired contrary to products and services of other vendors that you can promote. But the rewards are usually greater (usually 100% to you), and the income more stable.
Let the world know your mind
Now, given the choice, which would you rather do: a linear income work or a residual income one, and why?
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