What is residual income? Residual income is a type of income regularly received after a one time investment of money, time, and effort. When an author writes a book, he will spend time working on it. When the book has been written, he will publish it online or offline. During this time, he needs to spend some amount of money in order to publish and advertise it. He might create a website for that purpose, or look for another one where he can post and advertise such a product. At first, it’s all money out. There is no actual income at this point in time. But over a period of time, people start browsing and clicking the websites in which he advertised his book. When visitors get interested in his book and buy it, he will start making money especially when he becomes popular in his niche. Because of this, he receives a regular income even if he does not any more spend his time making another book. This type of income is called residual income.
Common to everybody, we have to work hard to earn some money. We all know that what we earned is commensurate with our work. It’s an income, isn’t it? This type of income is called linear income. Many are already satisfied with this income model because it’s quick and guaranteed. Aside from that, we can control and anticipate the amount of income we can earn for a period of time and that gives us a basis for budgeting. However, it is limited because it is also based on our energy and time. Every day, we are awake for 16 hours. Assuming, we earn $25 per hour. We work 16 hours a day so it gives us a daily income of $400. After a month, we have $12,000. Of course we need to eat and take a shower every day. We change clothes and go to work while being stuck in the middle of the traffic jam. On top of that, this work includes Saturdays and Sundays. Even if we enjoy this busy lifestyle, where can you get any more time to earn more?
Residual income is a better alternative for people who want more. With less effort, you could earn $5k, $10k, or $20k a month depending on how you set it up. Therefore, residual income is a business. But unlike most traditional businesses, residual income business can be set up without having to set aside your linear income. Since residual income business is still a business, you may need to spend a little effort from time to time. But that does not require you to give up your regular work if you still wish to work continuously. In fact, you don’t have to.
What are the types of residual income business? Residual income business is more common with artists such as singers, music composers and movie actors and actresses. They are paid for the work they have accomplished. After a certain period of time when their films or recordings are distributed in the market, they will receive a royalty fee. Every time a single copy of their work is sold, they earn a residual income. The entertainment industry is just one type of residual income business.
If entertainment is a residual income business, creativity is another type. This type of residual income business entails knowledge and intelligence. Inventors, scientist, and designers such as engineers also receive an income based on the agreed amount equivalent to their output. When another institution or any business entity uses the patent of their work, they may earn a huge amount of money. The only challenge here is that nowadays, most companies have their own R&D department that develops their own patent.