Residual income: What it is, why you want it, and how to create it

It’s probably crossed your mind before: Why do I have to work so hard just to make ends meet while Joe and Karen up the street work six hours a day from home and spend every other month on vacation?

What are they doing that I’m not? They must have got an inheritance or something. There’s no way I’ll ever have that kind of lifestyle.

We all know, and secretly despise, our “Joe and Karen from up the street”.

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I’m here to tell you that you can have that kind of lifestyle. And, no, they probably didn’t get some sort of huge inheritance that allows them to live that way.

The difference between you and “Joe and Karen” is your mindset.

They think of money differently than you do.

You think the only way you can make money is by working. More work = more money. And the only way you can shift the equation is by putting in more hours or getting paid more for your time.

“Joe and Karen” haven’t been waiting to get a raise. And they haven’t been putting in more hours.

They’ve been concentrating their effort on creating residual income.

What is that you say?

I’ll tell you just that and offer a suggestion on one of the best ways to create residual income for yourself.

The difference between residual and active income

Going back to my earlier example (more work = more money), most people think in terms of active income. It’s the money we get as a direct result of the work that we do.

We work for an hour and we get paid for an hour’s worth of work. Simple as that. It’s our wages, salaries, and the money we get as a result of our services if we’re self-employed.

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Residual, which is also called passive, income on the other hand is income that keeps rolling in even after the work is done.

The most commonly mentioned sources of residual income are royalties from books, movies, or songs and things like real estate or business investments.

The key difference between the two is that with residual income, you don’t actually have to be working, or even present, to earn the money.

Take Bill Gates, for example. He’s still earning a residual income from Microsoft even though he hasn’t been putting working hours into the business for years.

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How do you create residual income?

Residual income comes from building an asset.

In financial terms, an asset is an economic resource. It is anything tangible or intangible that can be owned or controlled to produce value.

A house is an asset to a landlord because they get paid rent every month.

A business is an asset to a business owner.

Each are assets because they produce value (in the form of income) for the person that owns or controls them (i.e. the landlord or the business owner).

How to start building an asset

There are a lot of different ways to build an asset and start generating a residual income.

Purchasing a rental property, investing in the stock market, writing a book, writing a song, or owning a business are just a few examples listed on many websites talking about residual income.

But what if you don’t have the capital you need to just up and purchase a house?

Or the financial savvy to get into the stock market?

And the articles that tell you to simply sit down and write a book… or pick up a guitar and write a song…

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They can get bent.

They make it sound like writing a book and navigating the publishing world is child’s play. And coming up with a killer, catchy song? The only reason I haven’t done it yet is because I haven’t felt like it. It’s not like it takes a life time of practice, natural ability, and some luck to write a hit single.

Here, I want to talk about generating residual income for us real-world people.

I’d like to introduce you to network marketing.

What is network marketing?

Entrepreneur.com defines network marketing as “A business model in which a distributor network is needed to build the business. Usually such businesses are also multilevel marketing in nature in that payouts occur at more than one level.”

Avon, Mary Kay Cosmetics, Tupperware, and Isagenix fall under the network marketing business model.

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Network marketing is a way to own your own business without having to come up with a huge initial investment or go through the turmoil of establishing the brand from the ground up.

It’s usually as little as a few hundred dollars for the purchase of a product sample kit and you have the opportunity to work with a brand that already has a reputation.

You can then build your own business by selling products or services and by recruiting other sales representatives into the structure.

How to find success with network marketing

Here are some tips for getting started with network marketing as your full- or part-time business.

1) Do your research.

You want to choose a good company to get involved with. This requires some research. Here are some questions you should get the answers to before you get involved:

  • How old is the company?
  • Are the products or services something consumers will use and need more of?
  • What is the payment structure like?
  • Is the company well respected?
  • Is the company growing?
  • What kind of support is there?
  • Will you be mentored at all?

2) Take the advice

The way network marketing businesses are structured, it’s in your mentor’s best interest to help you succeed. They succeed when you succeed. Don’t make the mistake of thinking you can do it better or do it without them.

Listen to what they did to become successful. Be willing to listen and be taught.

3) Be a good mentor

This is the flip side of the last point.

It’s easy to get caught up with bringing new people in that you don’t spend enough time training the people you have already brought in. Their success is your success. Take the time to help them get started and it will pay off in the long run.

4) Don’t miss an opportunity to follow up

So many people in the industry get calls, emails, or texts from someone who’s interested, but they don’t follow up with that person, then they’re gone forever.

Don’t be this person.

It reflects poorly on you and it can also give the company you’re working with a bad reputation. Not to mention you’re missing out on potential sales.

5) Treat it like a business

This is a business, so it deserves the respect of a business. That means there are things to consider before you go in.

  • How is this going to affect you tax-wise?
  • What are your write-offs?

Consider seeking the advice of accountants and lawyers who deal specialize in network marketing businesses. They know the answers to the questions above and they’ll be able to consider a myriad of things you haven’t thought of.

6) Patience

Don’t quit your day job because of a dream or good prospects. It needs to become reality first.

I wouldn’t recommend leaving your full-time position until you’re absolutely sure the income coming in from your new business will be there.

That means you’ve got to do it for a while to make sure it’s a stable company, you can successfully manage it, and the earnings are equal to or greater than what you were getting from your day job.

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Conclusion

Residual income is the way to wealth and financial freedom. Make your money work for you and you’ll be able to work until the day you die.

Residual income comes from building an asset. That is, something that can be owned or controlled to produce value for you.

A great asset is a business. And good business to get into are network marketing businesses. They require relatively little initial investment and they have an established reputation you can take advantage of.

But, it’s not easy. Contact me today and I can help you get started transitioning your life towards residual income.

Let me know what you think in the comments.

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