If you search the net 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 tons of good opportunities out there. But before you start spending money, let’s discuss what best ways to invest is and, above all, what it isn’t.
Webster’s dictionary defines residual income as “of, associated with, or being business activity in which the investor does not have immediate control over income”. I don’t feel that tells the whole story. Passive income is money that you get repeatedly without having to do much work (notice I didn’t say “any work”). It really is diverse from earned income in that you are not receiving money for the time (like you will employment). But depending on the residual income stream which you choose, you may in reality have immediate power over your revenue. But I’ll be able to that later.
Why can you want residual income? Well, like Robert Kiyosaki explains within his book Rich Dad Poor Dad, this is the main difference between the rich and also the middle class. The rich invest their money in different residual income streams. When their passive income exceeds their expenses, then they are financially free. “Financially free” simply means that you do not have to get a day job to pay your expenses. And you are “free” to then do whatever you want!
What Passive Income Isn’t. Before I get into letting you know what residual income is, let me first inform you need it isn’t. Passive income is not really the same as “recurring income”. Recurring income is money that you get frequently after having done work once. The best example would be TV sitcoms. Some actors get “residuals”. Actors get paid for filming the show. Afterwards, some actors receive money 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 off of each renewal. Royalties from the sale of books and music will also be residual.
Many say that multi-level-marketing or network marketing sales offer you passive income. Guess what? That’s residual too.
For those who have your small business or are self-employed, even in case you are making lots of money, this is NOT residual income. Should you get a salary from your business, which is where to volunteer. There is a approach to turn this into passive income, however – so stay tuned.
You know, I actually have to say that starting your personal 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 need to advertise your site. You will have to do that regardless of whether you might be selling your OWN products or possess the rights to sell other’s products. Marketing your internet site is work, simple as that. But it’s not just a job. And once your marketing efforts start taking off, you can make lots of money with little additional effort. But which is residual within my book, not passive.
What Passive Income IS – Residual income is a lot of things. The first thing that concerns mind, as well as, I think, the most famous example is real estate. In the event you own investment property and therefore are acquiring a positive cashflow from a house, commercial property, or apartment, that is certainly passive income. Should you rent rooms in your own home, that’s passive income too. You simply have to set this up once, and then the income comes in month after month. Interest income from savings accounts, CDs, and money-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 invest in any business, but don’t manage it, your profits are considered passive income, just what Webster was considering as he wrote the definition.
What about business? Well, that will depend about how you set it up. Rich people create businesses and set up a method that this business follows. That way, in the event the owner goes on vacation to get a month to Fiji, the employees follow the system as well as the owner still gets the profits. Any business will needless to say start out with many different work, but if you spend some time to set up a business so it gets reproducible results (exactly like a franchise), those profits become passive. And, based on the IRS, any salary you get from your enterprise is considered “earned” but profits are viewed “passive”. It is vital when starting an organization to check having an accountant as well as an attorney to set your business that financially benefits you the greatest.
What else can be regarded as passive income? How about self-storage facilities, parking garages/lots and dry cleaners! They all require some time to start-up, but once they may be set up, you collect money over and over again.
Residual vs Passive Income – Residual and residual income are like siblings. These are both very similar and most people really consider them synonyms. Precisely what does it matter, anyway? They may be both excellent ways to get money up to you every month after month without trading your time or maybe your freedom. How can it get better than that?
Reality Check – Avoid anybody that tells you that there is not any work associated with increase credit score. Passive income will not mean no work! If you are planning to spend in a business, a stock, or a real estate property, you should seek information (this is called “homework”). Scientific studies are work! You will also be required to manage your investments, to check up 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 more often than not, 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 a few individuals reading this who like, even love their jobs (if you still need one). A few of you might have your personal business – and congrats for you! But many of us have been in jobs just because we need to feed our families and pay the bills. Looking at passive income streams and investing your time and money 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 each month, week, or even every day is FUN. And attempting out new strategies and managing your cash – if you have some to control – is FUN.