What Does Residual Income Mean, and Why Is It So Good?
I would like to start this post by asking: Is your time precious? Before you answer that question, let me tell you that it doesn’t matter how much your employer pays you at the end of the month. You need to keep in mind that FOR YOU, YOUR TIME IS PRECIOUS! Not only precious, but your time should never be sold for something that you don’t really enjoy doing, even if you were paid millions for that.
In this post, I am going to show you how a residual income will help you to claim that time back and bring freedom to your life. So, what does residual income mean? Before going deep into it, I would like to clarify another three important concepts: active income, passive income and asset. I hope you enjoy the reading! 🙂
Important Definitions: Active Income, Passive Income and Asset
Active income: is the money you get by trading your time and effort. You earn only if you work! It takes the form of wages or earnings from active business participation.
Passive income: is the money received on a regular basis which doesn’t require an active involvement. In other words, you have cash-flow whether you work or not. For example, you receive passive income when you rent out your property.
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Asset: is anything that has value and can generate income or profit.
What Does Residual Income Mean?
Residual or recurring income is the money that you keep earning after your work is done. Besides, it is also known as the recurring payments that you get after the first sale is made. This means that after putting in an initial time, effort and maybe some money, you are going to get paid continuously for as long as the asset you created/built is profitable.
It is important to understand that both passive and residual income still require a certain degree of attention depending on its nature. It’s not possible to build a business or other asset and forget about it. A periodic or continuous monitoring of your asset is still going to be necessary. For example, if you have a property and hire a estate agent to manage tenants and maintenance you reduce your effort to a minimum, but you still need to keep an eye if the service is being done properly. The same happens with building a profitable website where regular maintenance will be necessary to keep it attracting many visitors.
Is Residual Income the Same as Passive Income?
After you make your first sale with your asset, the residual income can be considered a passive income if the following process is requiring only little effort from you. The only difference is that residual income implies that your passive income resulted from an initial work you had to do before reaping the recurring profits.
Assets With Potential to Generate Residual/Passive Income
Royalties from books, inventions and other intellectual property: After a book is written, for example, it can continue to be sold in the market and generate income from every sale.
Business investments: Any business where you don’t have to be necessarily present or involved with the daily activities.
Product development and automated online selling: For example, when you create an ebook, software or a course and sell them through the internet. It must be a system that won’t require significant customer service or support.
Real estate (commercial and residential property): It has the ability of generating constant income from renting.
Blog or website: You will get paid through advertisers, subscriptions, donations or affiliate links attached to the website pages.
Why is Residual Income So Good?
From the definitions and examples above, it’s clear the reasons why people aim for both residual and passive income. As it earns you money while not working, this mean more free time to do whatever you like, including dedicate your time to create more residual/passive income. That is the main reason why the rich get richer, because they keep using their time and money to create more asset which, in turn, will generate more and more income.
What Residual Income Could Mean to Your life?
Freedom: The residual/passive income has the potential do give you financial independence.
Not having to report to a boss or being in charge of anybody or anything, you could do whatever you like and follow your passion/hobbies. You could go wherever and whenever you like for as long as you wish.
Relative security: A residual/passive income cannot give you complete security but it’s something that you can rely on if you get sick or injured, get fired, want to leave your job or if you are in any other emergency situation.
How to Earn Residual or Passive Income?
Acquiring or creating those assets that I have mentioned. Of course owning a property will give you instant and significant cash-flow, but unless you already have a significant capital to invest, then this will not be instant at all!
So, if acquiring is a word that doesn’t exist in your dictionary at the moment, you will have to build or create an asset yourself. That’s right, and use your most precious asset – YOUR MIND to do that.
You can start building your asset from scratch and with $0 when you build a website, for example. This is my favorite route to residual income because it is accessible to anyone with a computer and internet connection.
But don’t get put off by thinking you don’t have the knowledge and skills for that because building a website in this day and age is a very simple and quick process.
You don’t need to focus on the technical skills in web design or professional writing, but on the value you offer to your visitors. In other words, being able to offer trust and quality information in your pages is the key!
In addition to that, it’s extremely important to have the proper training, tools and help from successful people that started from nothing, probably just like you!
In this page, I make a review of The Best Online Learning Platform that will help you start earning residual income from your online business. As a member myself, I was able to build this very website (myroomismyoffice.com) with no previous skills or knowledge. Everything that you see here, I learned inside this amazing training and community. So, check out my review and you will understand why I give so much credit to it.
If you have any question or comment about residual income, please leave a message below and I will be more than happy to help you out.
Want to Get Paid for Playing Games on Your Phone?
I tested and compared the best reward apps and sites, so you don't waste time on the fake ones. See which ones actually pay, how low the cash-out minimums go, and which offers are worth your time.
- ✅ Low cash-outs, some from just $1
- ✅ PayPal, gift cards and more
- ✅ Games, surveys and simple tasks
- ✅ Honest tips to avoid tracking problems
Earnings aren't guaranteed and results vary. Treat it as a bonus for time you already spend on your phone.
Hi Stefan,
I completely agree; residual income is what you should be aiming for when starting a business, and you explain the concept well.
When talking with people, it surprises me how many of them are actually blind to the concept of residual income in business. A lot of them will overlook the fact, or simply don’t understand, that the upfront time investment to buld is not just a waste of time, as you’re actually building a valuable asset.
If you spend two full weeks of work to build a website that’ll earn you $100 per month in residual income, they’ll look at it thinking “you’ve spend so much time, just to make $100”? When in fact, you’ve just built an asset that is worth around $1000-2000 if you sell it right away, and a lot more if you hang on to it yourself for a longer period of time.
Once you grasp this concept, you’ll feel like an idiot to trade your time for money.
Hi Guido, thanks for your input. You are completely right! Specially when you are starting out and don’t see any money coming in, many people think you are wasting your time and are very skeptical of all this. They forget that you are not only working for this $100 but most importantly, they are building an asset that will generate $100 every month. This is completely different from working for somebody else to earn the same $100.