If you search the web for “residual income”, you may find a definition or two, but mostly, what you find are websites selling you on the passive-income-flavor-of-the-day. It’s frustrating, I know. I don’t know about you, but before I jump into any opportunity or even before I take a trip, I like to do my research. That being said, there are a lot of excellent opportunities out there. But before you start spending money, let’s discuss what passive income is and, most significantly, what it isn’t.
Webster’s dictionary defines residual income as “of, associated with, or being business activity where the investor lacks immediate control of income”. I don’t think that tells the complete story. Passive income is money that you get again and again without having to do much work (notice I didn’t say “any work”). It is actually distinct from earned income in that you are currently not receiving money for the time (like you will work). But depending on the passive income stream that you simply choose, you may in reality have immediate power over your earnings. But I’ll reach that later.
Why would you want passive income? Well, like Robert Kiyosaki explains in his book Rich Dad Poor Dad, which is the main difference between the rich as well as the middle-class. The rich invest their funds in a variety of passive income streams. When their passive income exceeds their expenses, then they are financially free. “Financially free” basically means that there is no need to have a day job to cover your expenses. And you also are “free” to then do anything you want!
What Passive Income Isn’t. Before I get into suggesting what residual income is, let me first tell you want to buy isn’t. Residual income will not be exactly the same thing as “residual income”. Residual income is money that you receive on a regular basis after you have done work once. The very best example will be TV sitcoms. Some actors get “residuals”. Actors get paid for filming the show. Afterwards, some actors get compensated each time the show repeats. Sales agents that sell services, subscriptions, or renewable products (like insurance) sell that item once and, supplying the customer renews, will receive a commission off of each renewal. Royalties through the sale of books and music will also be residual.
Many claim that multi-level-marketing or multilevel marketing sales present you with residual income. Guess what? That’s residual too.
In case you have your small business or are self-employed, even in case you are making a lot of money, this may not be residual income. If you receive a salary from your business, that is certainly Jobs for college students. You will find a way to turn this into passive income, however – so stay tuned.
You know, I actually have to express that starting your personal website cannot be residual income. Whether you are selling a product (including an eBook, seminar or some other information) or even a service, you still have to advertise your internet site. You should do this whether or not you happen to be selling your personal products or hold the rights to market other’s products. Marketing your site is work, simple as that. But it’s not just a job. And once your marketing efforts begin taking off, you can make a lot of money with little additional effort. But which is residual within my book, not passive.
What Residual Income IS – Passive income quite a bit of things. The first thing that comes to mind, and in addition, I think, the most popular example is real estate property. Should you own investment property and therefore are acquiring a positive cashflow from the house, commercial property, or apartment, that is certainly passive income. In the event you rent rooms in your own home, that’s passive income too. You only have to set this up once, and so the income will come in every month. Interest income from savings accounts, CDs, and money-market accounts are passive – the bank pays you to keep your cash in those accounts. If you have a website with banner ads or Google AdSense ads, that can be called passive as well.
Should you spend money on any company, but don’t manage it, your profits are viewed passive income, just what Webster was thinking of when he wrote the definition.
How about business? Well, that depends about how you set it up. Rich people create businesses and set up a system that this business follows. That way, when the owner continues on vacation to get a month to Fiji, the staff adhere to the system as well as the owner still gets the profits. Any company will of course start out with many different work, but if you spend some time to set up a company so that it gets reproducible results (exactly like a franchise), those profits become passive. And, according to the IRS, any salary you receive from your business is considered “earned” but profits are considered “passive”. It is vital when starting a business to check with the accountant and an attorney to set up your business that financially benefits the finest.
What else can be regarded as residual income? Think about self-storage facilities, parking garages/lots and dry cleaners! Each of them require serious amounts of launch, but once they are set up, you collect money repeatedly.
Residual vs Passive Income – Residual and passive income are like siblings. They are both very similar and many people really consider them synonyms. Precisely what does it matter, anyway? They are both excellent methods for getting money up to you month after month after month without trading your time or your freedom. How can it get better than that?
Reality Check – Watch out for anyone who lets you know that there is absolutely no work associated with quick money today . Residual income does not mean no work! If you are intending to invest in a business, a stock, or perhaps a property property, you should do your research (this is called “research”). Research is work! You will additionally be asked to manage your investments, to check on their xwmpuf to make changes as necessary. That’s work too!
The great thing is that research and management is just a part-time endeavor. And more often than not, that work can be completed from almost anywhere, including over a beach in Fiji.
Let us not forget the enjoyment factor. I’m sure there are some of yourself looking over this who like, even love their jobs (if you still need one). A number of you have your own business – and congrats for you! But the majority of us are in jobs just because we have to feed our families and spend the money for bills. Looking at residual income streams and investing your time and expense can bring you many, many returns. Researching for and implementing your passive income plans so that you can live your dreams is FUN. Getting money every month, week, or even every day is FUN. And seeking out new strategies and managing your cash – once you have some to control – is FUN.