If you search the internet for “residual income”, you may find a definition or two, but mostly, what you find are websites promoting 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 great opportunities out there. But before you start spending money, let’s discuss what passive income ideas is and, above all, what it isn’t.
Webster’s dictionary defines passive income as “of, associated with, or being business activity where the investor lacks immediate control over income”. I don’t think that tells the whole 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 diverse from earned income in that you will be not receiving money for the time (like you would probably employment). But depending on the residual income stream which you choose, you may in reality have immediate control over your revenue. But I’ll be able to that later.
Why would you want residual income? Well, like Robert Kiyosaki explains within his book Rich Dad Poor Dad, that is the main distinction between the rich and the middle class. The rich invest their funds in different residual income streams. When their passive income exceeds their expenses, chances are they are financially free. “Financially free” simply means that you do not have to possess a day job to cover your expenses. And you also are “free” to then do whatever you desire!
What Passive Income Isn’t. Before I get into telling you what residual income is, let me first inform you want it 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 best example will be TV sitcoms. Some actors get “residuals”. Actors earn money from filming the show. Afterwards, some actors get paid each and every 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 away from each renewal. Royalties from the sale of books and music are also residual.
Many say that multi-level-marketing or multilevel marketing sales present you with passive income. Do you know what? That’s residual too.
For those who have a small company or are self-employed, even in case you are making a lot of cash, this is simply not passive income. Should you receive a salary out of your business, which is online business. There exists a method to turn this into residual income, however – so stay tuned.
You know, We have to express that starting your own website cannot be residual income. Whether you are selling a product (like an eBook, seminar or other information) or perhaps a service, you still need to promote your internet site. You should do that no matter whether you happen to be selling your personal products or hold the rights to market other’s products. Marketing your website is work, simple as that. But it’s not really a job. And once your marketing efforts begin taking off, you can make a lot of money with little additional effort. But that is residual in my book, not passive.
What Residual Income IS – Residual income quite a bit of things. The very first thing concerns mind, as well as, I think, the most famous example is real estate. Should you own investment property and they are obtaining a positive cash flow from the house, commercial property, or apartment, that is passive income. If you rent rooms in your own home, that’s passive income too. You only need to set this up once, and therefore the income will come in month after 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 website with banner ads or Google AdSense ads, that can be called passive as well.
Should you invest in any organization, but don’t manage it, your profits are thought residual income, exactly what Webster was thinking of when he wrote the definition.
Have you thought about business? Well, that depends regarding how you set it. Rich people create businesses and set up a system the business follows. This way, if the owner continues vacation to get a month to Fiji, the staff follow the system and also the owner still will get the profits. Any organization will needless to say begin with many different work, however, if you take time to set up a company so 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 business is considered “earned” but profits are thought “passive”. It is vital when starting an organization to check having an accountant and an attorney to set up your business that financially benefits the finest.
What else can be regarded as passive income? What about self-storage facilities, parking garages/lots and dry cleaners! Each of them require serious amounts of start up, but once they may be set up, you collect money again and again.
Residual vs Residual Income – Residual and residual income are like siblings. These are both very similar and many people really consider them synonyms. What does it matter, anyway? They may be both excellent ways to get money with you every month after month without trading your time and effort or perhaps your freedom. How can it get better than that?
Reality Check – Watch out for anyone that tells you that there is not any work involved in get free money. Passive income does not mean no work! If you are going to invest in a business, a stock, or even a real estate property property, you will have to do your research (this is called “homework”). Research is 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 only 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 keep in mind the enjoyment factor. I’m sure there are several of you reading this article who like, even love their jobs (if you still need one). Some of you have your personal business – and congrats for you! But most of us have been in jobs just because we have to feed our families and pay the bills. Looking at passive 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 each month, week, or even every day is FUN. And attempting out new strategies and managing your money – once you have some to handle – is FUN.