Residual Income
What is Passive or Residual Income
Click HereWhat It Takes to Earn Passive Income
Residual income (also called passive, or recurring income) is income that continues to be generated after the initial effort has been expended. Compare this to what most people focus on earning: linear income, which is "one-shot" compensation or payment in the form of a fee, wage, commission or salary.
Linear income is directly proportional to the number of hours invested in it (40 hrs. of pay for 40 hrs. of work), but one of the great advantages of residual income is that once things are set in motion, you continue making money from your initial efforts, while gaining time to devote to other things... such as generating more streams of residual income!
There are a variety of ways residual income can be earned. Following are some examples.
1) Transfer the rights to a book you wrote, a software program you created, a gadget you invented, or a song you recorded, to a company that agrees to pay you a percentage of each copy of your work sold in the future.
2) Become an actor and draw residual income from each of your movies, TV shows, or commercials, each time they run.
3) Let an oil company drill a well on your property in exchange for a percentage of the revenue.
4) Purchase an office building or other real estate that earns you recurring income through lease or rental payments.
The above ways of earning residual income generally aren't that easy to implement. Following are some that are more attainable for the average person:
5) Start a savings and investment program that pays you residual income in the form of interest or dividends.
6) Join associate programs.
Call them what you will: referral, reseller, affiliate, bounty or associate programs, they are very popular on the Internet. Some of them offer similar opportunities for earning residual income.
Companies arrange such programs to compensate reps, resellers, dealers, associates, affiliates (or whatever the designation used) for promoting their products and services.
Reps are generally given a unique I.D. number and/or web page or site, so the company can track the source of each sale and compensate the proper rep.
Keep in mind that many associate programs only pay one-shot commissions, rather than recurring, residual compensation for your efforts.
7) Create and market your own information products.
Self-publishing your own information products has several advantages over marketing through other publishing companies:
- You, as info-product creator, get 100% of the profit, versus a small percentage of royalties through traditional publishing companies, if they decide to publish your work at all.
- By gaining complete control over the marketing of your information products, you can profit from them for as long as enough viable markets (willing, able and accessible buyers) exist.
- By gaining complete control over the marketing of your information products, you can profit from them for as long as enough viable markets (willing, able and accessible buyers) exist.
Conversely, traditional publishers usually have so many new titles by other authors vying for their marketing budgets and attention that unless an author is well-known, or the work is a top seller, the author's work is not given much priority and is pulled from the market within year or two, thus fading into obscurity.
Last Words...
The best types of residual income are usually those that you have exclusive rights to or otherwise control. They may be harder and more time-consuming to develop or acquire as opposed to promoting products and services of other suppliers, but the rewards are usually greater, and the income more stable.
I'm not against earning some good, honest, "one-shot" linear income, but given a choice, which would you rather do: work hard and get paid only once, through linear income, or get paid continuously - perhaps for years or even the rest of your life - for hard work you perform only once, through residual income
Passive income is highly sought after and often misunderstood.
Passive income streams require an upfront investment and a lot of nurturing in the beginning. After some time and hard work these income streams start to build and are able to maintain themselves, bringing you consistent revenue without much effort on your part.
Speaking from personal experience adding passive income streams to your portfolio can help you increase your earnings and accelerate your financial goals in tremendous ways.
If you want to get started earning passive income here’s what you should know first.
What It Takes to Earn Passive Income
Before we get into the passive income ideas I think it’s a good idea to first clear up a couple of misconceptions. Although the word “passive” makes it sound like you have to do nothing to bring in the income this just isn’t true. All passive income streams will require at least one of the following two elements:
1) An upfront monetary investment, or
2) An upfront time investment
You can’t earn residual income without being willing to provide at least one of these two. Today, I have a big list of passive income ideas you can try regardless of the category you fall in.
Passive Income Ideas Requiring an Upfront Monetary Investment
Dividend Stocks – Dividend stocks are tried and true way to earn passive income. You will have to do plenty of research to find good stocks and invest a significant amount of money to receive large dividend checks. However, if you consistently invest money into dividend stocks you can amass a nice residual income over time.
For any of these investment opportunities, make sure you open an account at the best online brokerage, and get rewards while doing it:
Peer to Peer Lending – P2P lending is the practice of loaning money to borrowers who typically don’t qualify for traditional loans. As the lender you have the ability to choose the borrowers and are able to spread your investment amount out to mitigate your risk. The two most popular peer to peer lending platforms are Prosper and Lending Club.
Rental Properties – A cash flowing rental property is a fantastic way to bring in a monthly income. To make this truly passive you can outsource the running of the properties to a management company.
One of my favorite ways to get started with rental properties is through crowd funding. Similar to LendingClub, you can start investing in real estate for as little as $5,000 at platforms like RealtyShares (We offer our readers a bonus to of $25 to start to off. Simply reply to the “Congratulations on Linking Your Bank Account” email with the referral code TCI25. It takes up to 30 days to process the referral code and make the payment, but it's free money).
Another similar platform is FundRise.
The great thing about using a platform versus doing it yourself is that the income is even more passive.
CD Ladders Or Money Market Funds – Building a CD Ladder requires buying CDs (certificates of deposits) from banks in certain increments so that you can earn a higher return on your money. CDs are offered by banks and since they are a low risk investment they also yield a low return. This is a good option for the risk averse.
Check out these great deals on high yield money market funds:
Annuities – Annuities are an insurance product that you pay for but can then provide you passive income for life in the form of monthly payments. The terms with annuities vary and are not always a great deal so it’s best to talk to a trusted financial advisor if you’re interested in purchasing an annuity.
Passive Income Ideas Requiring an Upfront Time Investment
Almost all of these ideas require starting a personal blog or website. But the great thing about that is that it's incredibly cheap to do. We recommend using Bluehost to get started. You get a free domain name and hosting starts at just $3.95 per month. You can afford that to start building a passive income stream.
Sell an eBook Online – Self Publishing is mainstream today. When you purchase an eBook off of Amazon there’s a pretty good chance you’re buying a self-published book. Self-publishing is also ridiculously easy. I tried this a few years ago and couldn’t believe how simple the process was. To self-publish a book you’ll first need to write and edit it, create a cover, and then upload to a program such as Amazon’s Kindle Direct Publishing. Don’t expect instant success though. There will need to be a lot of upfront marketing before you can turn this into a passive income stream.
Create a Course on Udemy – Udemy is an online platform that lets its user take video courses on a wide array of subjects. Instead of being a consumer on Udemy you can instead be a producer, create your own video course, and allow users to purchase it. This is a fantastic option if you are highly knowledgeable in a specific subject matter. This can also be a great way to turn traditional tutoring into a passive income stream!
Selling Stock Photos – Do you ever wonder where your favorite websites, blogs, and sometimes even magazines get their photos? These are normally bought from stock photo websites. If you enjoy photography you can submit your photos to stock photo sites and receive a commission every time someone purchases one of them.
Licensing Music – Just like stock photos you can license and earn a royalty off of your music when someone chooses to use it. Music is often licensed for YouTube Videos, commercials, and more.
Create an App – If you own a smartphone or tablet then it’s safe to assume you have several apps downloaded. But have you ever had an amazing idea for an app? If so, you could consider hiring a programmer to create your app for you. You could then sell it on the App store for residual income.
Affiliate Marketing – Affiliate marketing is the practice of partnering with a company (becoming their affiliate) to receive a commission on a product. This method of generating income works the best for those with blogs and websites. Even then, it takes a long time to build up before it becomes passive. If you want to get started with affiliate marketing check out this great list of affiliate marketing programs.
Network Marketing – Network marketing, or multi-level marketing, seems to be on the rise. Companies such as Young Living Oils, Avon, Pampered Chef, and AdvoCare are all multi-level marketing companies. You can earn passive income through network marketing by building a team underneath you (often referred to as a down line.) Once you have a large team you can earn commissions off of their sales without having to do much.
Design T-Shirts – Sites like Cafe Press allow users to custom design items like T-shirts. If your design becomes popular and makes sales you’ll be able to earn royalties.
Sell Digital Files on Etsy – I’ve been into home décor lately and I had to turn to Etsy to find exactly what I wanted. I ended up purchasing digital files of the artwork I wanted printed out! The seller had made a bunch of wall art, digitized, and listed it on Etsy for instant download. There are other popular digital files on Etsy as well such as monthly planners. If you’re into graphic design this could be an amazing passive income idea for you.
Semi-Passive Small Business Ideas
Car Wash – It’s always been a dream of mine to own a car wash. This seems like such a great way to earn a semi-passive income. While regular maintenance will be needed at a car wash it’s something you can either hire out or perform once a week.
Vending Machines – Vending machines are another great low maintenance small business idea. I have a friend who has vending machines all over neighboring towns. He replenishes and cashes them out once every two weeks. His vending machine business is part of his retirement plan.
Storage Rentals – My cousin owns a set of storage rentals and receives monthly checks for letting customers rent these out. The only time she seems to do any work for these is when she has an opening for one of the storage units.
Laundromat – I debated on listing this one here because while in theory it seems like owning a laundromat would be semi-passive I anticipate there would be a whole lot of ongoing maintenance needed. You be the judge on this one.
Easy Passive Income Ideas
Last on the list I wanted to point out a couple of easy passive income ideas. These require no money and no upfront work. While the earnings are menial you still can’t beat easy passive income!
Cashback Rewards Cards – If you pay your bills with a credit card make sure it offers cash back rewards. You can let your rewards accrue for a while and possibly put the easy money you earned toward another passive income venture! (Be sure that the card you select doesn’t have an annual fee or you might be cancelling out your rewards).
Cashback Sites – Just like cashback rewards cards you should opt to use a cashback site when shopping online. If you don’t you’re giving up free money that requires little to no work! We just compared the two most popular sites – eBates versus TopCashBack.
How to Get Started
While it can be tempting to want to pick five passive income ideas to get started with I’d really encourage you to pick one in the beginning. You need time and the ability to focus to really a grow a passive income stream. Master one thing before moving on to the other.
It’s going to take a substantial amount of time or money in the beginning but I promise earning passive income is everything it’s cracked up to be! Pick an idea, make a plan, and dedicate yourself until that income stream comes to fruition.
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