Residual Income
Residual income is when you continue to get paid after the work is done. This includes commission from Network Marketing, royalties from books, movies, or songs and also income that comes from real estate or business investments where you don’t actually have to be present to earn it. For example, Bill Gates is still making a residual income from Microsoft even though he isn’t working there anymore.
Residual income comes from building an asset that continues to pay you long after the work has been done. A book, movie or song is an asset to the people earning royalties from it. A house is an asset to the landlord being paid rent and a business is an asset to the business owner who does not need to be involved in the day-to-day activities anymore. Customer base in Network Marketing is an asset to an Network Marketer who does not continue selling as his customers buy products from him each month without him being involved in the actual monthly sales.
WHAT IS LINEAR INCOME?
Linear or active income comes as a direct result of your own efforts. This is when we work for a certain number of hours and get paid a certain amount for those hours work. This can be seen in wages, salaries, and self-employed service providers like lawyers or doctors. In the sales environment active income refers to commission earned for product or service sold. This commission is only earned once and each month a salesperson starts from a zero position and works very hard so that come month they will earn their commission. If no sales were achieved at a particular month there is no commission to be earned.
There are many people who get paid vast amounts of money to become the CEO of a company, play professional sports, or star in a movie. Earning a high active income is often a lot of hard work and requires a dedication beyond most of us. It’s also limited because no matter how much money you get paid you still need to show up to work to earn your money.
THE PASSIVE INCOME MYTH!
Many people talk about passive income and create the impression that you never have to do anything to keep that income going. The truth is that you will normally have to keep your eye on things if you want it to run smoothly. For example Richard Branson doesn’t run any of the 400+ companies he started but he goes over the numbers each day to make sure they’re performing well and calls the CEO if there are any problems. In Network Marketing it means that you should always check on your customers to ensure that they continue buying their products on a monthly basis.
There is also an idea that we should work to build a passive income asset and then sit on the beach relaxing for the rest of our lives. The truth is that most people would get extremely bored with this scenario and will be eager to find something to do. That’s why the world’s billionaires continue to work - they love what they do and it stopped being about the money a long time ago.
HOW TO BUILD RESIDUAL INCOME?
The key idea here is leverage. You must be able to leverage other people’s effort, or other people’s time or other people’s money in order to create a residual income. Richard Branson can run 400+ companies because he isn’t actually running any of them at all his CEOs are.
To create residual income, you need to create something that people will continue to buy on a regular basis long after you’ve created it. A house is a prime example of this as people will continue to pay rent for the right to live in the house. A business needs to have products that are sold over and over again rather than trading the business owner’s time for money.
The products might be an item that has been created and can be duplicated or it might be the time of other people.
THE FIRST STEP TO CREATING RESIDUAL INCOME!
The first thing is to be aware of how you work for active or residual income. Then you want to decide a path that transitions from active to residual income over time. It’s hard to start a new business and create residual income tomorrow so you have to have some patience.
As you make more residual income you can start to scale back the hours you put into active income. This will mean your residual income will grow even faster once you pay it more attention.
As Jim Rohn was famous for saying: “I’m working full-time on my job and part time on my fortune. But it won’t be long before I’m working full-time on my fortune. Can you imagine what my life will look like?”