If you search the web for “residual income”, you may find a definition or two, but mostly, what you find are websites trying to sell 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 begin spending money, let’s discuss what passive income is and, most significantly, what it isn’t.
Webster’s dictionary defines passive income as “of, relating to, or being business activity in which the investor does not have immediate control over income”. I don’t think that tells the whole story. Passive income is money that you get repeatedly while not having to do much work (notice I didn’t say “any work”). It really is distinct from earned income in that you will be not receiving money to your time (like you will a job). But depending on the residual income stream that you simply choose, you may actually have immediate control over your income. But I’ll reach that later.
Why could you want residual income? Well, like Robert Kiyosaki explains within his book Rich Dad Poor Dad, this is the main distinction between the rich and also the middle class. The rich invest their money in various passive income streams. When their passive income exceeds their expenses, chances are they are financially free. “Financially free” simply means that there is no need to possess a day job to pay your expenses. And you are “free” to then do whatever you want!
What Residual Income Isn’t. Before I enter into letting you know what passive income is, let me first inform you need it isn’t. Residual income is not exactly the same thing as “recurring income”. Residual income is money that you get regularly after you have done work once. The best example could be TV sitcoms. Some actors get “residuals”. Actors get paid for filming the show. Afterwards, some actors get compensated each and every time the show repeats. Sales representatives that sell services, subscriptions, or renewable products (like insurance) sell that item once and, offering the customer renews, will receive a commission away from each renewal. Royalties from the sale of books and music can also be residual.
Many claim that multi-level-marketing or multi-level marketing sales provide you with passive income. Do you know what? That’s residual too.
For those who have a small business or are self-employed, even should you be making a lot of money, this is simply not passive income. Should you obtain a salary from the business, that is rent your car. You will find a approach to turn this into residual income, however – so stay tuned.
You know, I have to state that starting your very own website cannot be passive income. If you are selling a product or service (including an eBook, seminar or some other information) or even a service, you still have to market your site. You will need to do that no matter whether you might be selling your very own products or have the rights to market other’s products. Marketing your internet site is work, simple as that. But it’s not a job. And as soon as your marketing efforts begin to take off, you can make a lot of money with little additional effort. But that is certainly residual within my book, not passive.
What Passive Income IS – Residual income is a lot of things. The first thing that comes to mind, and in addition, I believe, the most famous example is real estate. Should you own investment property and therefore are acquiring a positive income from a house, commercial property, or apartment, that is residual income. In the event you rent rooms within your house, that’s residual income too. You only have to set this up once, and then the income is available in month after month. Interest income from savings accounts, CDs, and cash-market accounts are passive – the bank pays you to keep your hard earned money in those accounts. For those who have a web site with banner ads or Google AdSense ads, that can be called passive as well.
Should you put money into any business, but don’t manage it, your profits are considered passive income, precisely what Webster was thinking about as he wrote the definition.
What about business? Well, that will depend on how you set it up. Rich people create businesses and set up a method the business follows. That way, if the owner continues vacation for a month to Fiji, the staff stick to the system and also the owner still receives the profits. Any company will needless to say start off with a lot of work, however, 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, based on the IRS, any salary you get from your company is considered “earned” but profits are thought “passive”. It is essential when starting an organization to check with the accountant plus an attorney to set increase your business that financially benefits you the best.
What else can be considered residual income? What about self-storage facilities, parking garages/lots and dry cleaners! Each of them require some time to start-up, but when they are set up, you collect money again and again.
Residual vs Residual Income – Residual and residual income are like siblings. They may be both very similar and most people really consider them synonyms. Exactly what does it matter, anyway? They are both excellent techniques for getting money up to you every month after month without trading your time and effort or maybe your freedom. How can it get better than that?
Reality Check – Beware of anyone that informs you that there is absolutely no work associated with online jobs. Residual income will not mean no work! If you are planning to spend in a business, a stock, or even a real estate property property, you will need to do your research (this is known as “due diligence”). Scientific studies are work! Additionally, you will be required to manage your investments, to check on their xwmpuf and make changes as necessary. That’s work too!
The great thing is that research and management is simply a part-time endeavor. And most of the time, that work can be completed from almost anywhere, including on a beach in Fiji.
Let us keep in mind the enjoyment factor. I’m sure there are a few of yourself reading this who like, even love their jobs (if you still need one). A number of you may have your personal business – and congrats to you personally! But the majority of us are in jobs just because we need to feed our families and spend the money for bills. Looking at residual income streams and investing your money and time can bring you many, many returns. Researching for and implementing your residual income plans so you can live your dreams is FUN. Getting money on a monthly basis, week, or even every day is FUN. And seeking out new strategies and managing your cash – when you have some to manage – is FUN.