Residual Income. It is possible that word got your attention. Some of us run to the word, others haven’t the faintest idea what it means, and I imagine it’s all based on our own situations and circumstances. You see, there are a variety of different types of income;
- Earned Income
- Portfolio Income
- Residual Income (passive)
Let’s dive a little deeper into the variety of different incomes, and I believe it will help paint a beautiful picture of why you want residual income and my thoughts on the best ways of achieving it.
Earned Income (or active income) – You work, you get paid. Basically, it is like an exchange of your time for money. This could be accumulated through salary, bonuses, contract work, etc. Another way to look at earned income is someone else decides what you are worth. Be it 100k a year, or $10.00 an hour, either way, it’s already dictated by where you are employed.
And, I’m not suggesting there is anything wrong with that, especially if you love what you do – however, there is a cap, there is a ceiling and especially more recently, it is a variable, a huge one.
With respect to taxes, earned income is often taxed higher than any other income available, the more you make, the more you pay. This could even be upwards of 50% (providing you don’t have other things happening for you that would help reduce that bracket)
We see more and more corporations and businesses closing all the time and once that happens, that earned income stops.
Portfolio Income – This could be seen as well as investment income. You invest a certain amount of money and it pays out higher than your investment. Also known as capital gains.
These might come in the form of real estate, stocks or bonds, mutual funds, etc. There are often a handful of clauses and legal ones that come with these types of investments, and the return is never guaranteed. It is potentially one of the highest risk types of income – however, done right, with the right planning can also be quite lucrative.
Tax implications are a little different here as well. Most common is somewhere between 9 – 20% and over the course of a year (usually). There are some shorter terms available of course, but let’s deal with the averages for the purposes of this example.
Residual Income (or passive income) – This type of income is either from assets you own or in a model that has you complete the work once and it continues to pay you over and over. Enticing really.
Residual income can come from a few ways; owning a rental property that a tenant. pays you month after month, royalties from a book or song you may have written or performed, and my favorite – a home-based business.
This type of income is favored the most in the world of taxes. For example, there are huge deductions when it comes to owning a home based business. You are able to deduct portions of your home, car, bills, eating at restaurants and much more. If anything, some people look at an owning a home based business in addition to other types of incomes they receive for the sole purposes of tax deductions.
It is said, that residual income is the key to building wealth.
It is a means of having your money work for you.
Completing the work for a limited time, say for example building a sales team, and having it pay you time and time again with little to no hands-on effort. Sometimes, there are some misconceptions when it comes to this type of income or really the potential it can bring, but I assure you once you understand its power, there is no turning back.
Let’s consider some familiar names …
Warren Buffett, Bill Gates, Richard Branson, and Oprah were not born into riches. Yet over their lifetimes they’ve accumulated huge personal wealth.
This is because they understand and use the power of leverage through residual income.
Perhaps you are familiar with the term laptop lifestyle – being able to work, from anywhere in the world as long as you have a computer or a smartphone. Intrigued? And you should be. So let me break down a few ways to achieve that time freedom, enjoying the beaches of the world (or whatever place excites you most!)
Leverage.
The ability to leverage someone else’s time, or money.
How do we do this?
By investing in or creating something that people will continue to buy time and time again – or a service that people will continue to subscribe to for years to come.
Let’s consider one of my best sellers, for example, a Water bottle and Filter. We are all aware of the importance of safe drinking 
water, and with the convenience of this system, it has people purchasing for themselves and sharing it with others. It comes with a number of health benefits, as it removes most all harmful things in our water supply, which naturally makes it an excellent choice for consumers.
The good news is, water isn’t going anywhere. And when you can offer consumers an affordable product, better for their health and overall water drinking habits, this is a product that will continue to pay me month after month without having to set up shop somewhere or spend any real time selling someone on the importance of clean water.
Bottom line, if you are not already in receipt of residual income, or perhaps not seeing enough of it, change it. Find it, and hang on to it. Residual income doesn’t necessarily happen overnight, but with a solid foundation, and the right systems in place, it will pay you for a lifetime.
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I look forward to hearing from you!
Rick Billings
COACH. TRAINER. HOME BUSINESS ENTREPRENEUR.
Email: rick@rickbillings.com
Facebook: http://facebook.com/rickbillingsentrepreneur/
Skype: rbillings3
