If you search the internet 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. With that being said, there are tons of good opportunities out there. But before you begin spending money, let’s discuss what make m.oney online is and, above all, what it isn’t.
Webster’s dictionary defines residual income as “of, in relation to, or being business activity in which the investor does not have immediate control over income”. I don’t think that tells the complete story. Residual income is money that you receive again and again without needing to do much work (notice I didn’t say “any work”). It is actually different than earned income in that you will be not receiving money for your time (like you would probably work). But depending on the residual income stream that you simply choose, you may actually have immediate control over your earnings. But I’ll get to that later.
Why could you want passive income? Well, like Robert Kiyosaki explains in his book Rich Dad Poor Dad, this is the main difference between the rich and the middle class. The rich invest their funds in different passive income streams. When their passive income exceeds their expenses, they are financially free. “Financially free” basically means that you do not have to get a day job to pay your expenses. And also you are “free” to then do whatever you desire!
What Residual Income Isn’t. Before I get into letting you know what passive income is, let me first let you know want to buy isn’t. Residual income is not exactly the same thing as “recurring income”. Residual income is money that you receive frequently after you have done work once. The very best example could be TV sitcoms. Some actors get “residuals”. Actors earn money from filming the show. Afterwards, some actors get compensated each time the show repeats. Sales people that sell services, subscriptions, or renewable products (like insurance) sell that item once and, offering the customer renews, will receive a commission from each renewal. Royalties through the sale of books and music can also be residual.
Many claim that multi-level-marketing or multilevel marketing sales provide you with passive income. Guess what? That’s residual too.
In case you have your small business or are self-employed, even in case you are making lots of money, this may not be passive income. In the event you get a salary from the business, that is certainly sell on craigslist. There is a approach to turn this into residual income, however – so stay tuned.
You know, I have to state that starting your personal website cannot be passive income. Whether you are selling a product (like an eBook, seminar or some other information) or even a service, you still need to advertise your site. You should do this no matter whether you happen to be selling your OWN products or possess the rights to market other’s products. Marketing your site is work, simple as that. But it’s not a job. And once your marketing efforts start taking off, you can make lots of money with little additional effort. But that is certainly residual within my book, not passive.
What Passive Income IS – Passive income is a lot of things. The first thing that comes to mind, and also, In my opinion, the most popular example is property. Should you own investment property and therefore are getting a positive income from a house, commercial property, or apartment, that is passive income. In the event you rent rooms in your own home, that’s residual income too. You only have to set this up once, and therefore the income will come in every month. Interest income from savings accounts, CDs, and cash-market accounts are passive – the bank pays you to keep your cash in those accounts. In case you have a web site with banner ads or Google AdSense ads, that can be called passive as well.
If you spend money on any organization, but don’t manage it, your profits are thought passive income, just what Webster was thinking of when he wrote the definition.
Have you thought about business? Well, that depends about how you set it up. Rich people create businesses and set up a system that this business follows. This way, in the event the owner goes on vacation for any month to Fiji, the workers adhere to the system as well as the owner still gets the profits. Any company will obviously start off with plenty of work, but if you spend some time to set up a company to ensure that it gets reproducible results (exactly like a franchise), those profits become passive. And, in accordance with the IRS, any salary you receive from your enterprise is considered “earned” but profits are thought “passive”. It is important when starting an organization to check with an accountant as well as an attorney to set up your business that financially benefits you the best.
What else can be looked at residual income? What about self-storage facilities, parking garages/lots and dry cleaners! They all require serious amounts of start up, but once these are set up, you collect money again and again.
Residual vs Passive Income – Residual and residual income are like siblings. They are both very similar and many people really consider them synonyms. Exactly what does it matter, anyway? These are both excellent methods for getting money in your hands every month after month without trading your time or perhaps your freedom. How can it improve than that?
Reality Check – Beware of anyone that lets you know that there is absolutely no work associated with how to get free money. Passive income will not mean no work! If you are planning to invest in a business, a stock, or even a property property, you will have to seek information (this is known as “homework”). Scientific studies are work! Additionally, you will be asked to manage your investments, to check on their xwmpuf and make changes as necessary. That’s work too!
The good news is that research and management is simply a part time endeavor. And usually, that work can be performed from almost anywhere, including over a beach in Fiji.
Let us not forget the FUN factor. I’m sure there are some individuals reading this who like, even love their jobs (if you still have one). A number of you might have your personal business – and congrats to you personally! But many of us are in jobs just because we need to feed our families and spend the money for bills. Looking into residual income streams and investing your time and expense can provide you with many, many returns. Researching for and implementing your passive income plans so that you will 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 hard earned money – once you have some to control – is FUN.