What Is A Residual Income Business?

Residual Income is one of essentially two kinds of income: renewable income and regularly recurring (or ‘residual’ / ‘passive’) income. Let’s look at each one briefly, starting with…

 

Renewable income

This is the kind of income that most people are familiar with. You work, you get paid. You work again, you get paid again. In other words, to renew your income, you must renew your work activities.

This applies to wage earners (often paid weekly), salary earners (usually paid monthly) and also to professionals (e.g. consultants, doctors, attorneys, accountants, architects), who get paid according to their stated payment terms for the professional work they do.

For all of these kinds of jobs or careers it’s a case of ‘no work, no pay‘. For professionals, this translates to ‘no clients or patients, no income‘.

It also means:

  • As a salary or wage earner, if you take more than your allowed amount of vacation time, you don’t get paid for that ‘unpaid leave’ portion.
  • If you own your own business or professional practice, and you get ill or incapacitated for a long time, you’ll earn no income until you can get back to generating your income again, if ever.
  • If you have your employment terminated (e.g. retrenched), there’s no monthly pay after your ‘golden handshake’.
  • If you get too old to be productive, you’ll receive income; or at best there’ll be some kind of lower income.
  • When you finally retire, your pension income is lower than what you’re accustomed to. Not only that, but it also doesn’t keep up with inflation year after year. The value (buying power) of your income becomes less each year and your quality of life drops too, and can progressively get worse and worse over the years.

Some benefits of renewable income

It is used to create ‘now’ money, which is useful in the short term, and for many people, it is their only source of income for most of their lives. But experience has shown that one’s regular work income often isn’t enough to enable one to live the quality of life desired. As they say, the money runs out before the month does. This can lead to overwork, needing to have a day job while moonlighting with a night job too.

The result is often heavy stress, non-fulfilment in life, and even serious ill-health.

 

Residual income

This is the kind of income that, once it has been established, keeps coming in regularly even when you’re not actively engaged in generating it on a daily basis.

If you have millions to invest, you can usually start earning recurring income on your assets immediately. But, you first need to have the millions to invest. Most people don’t. If you don’t have the capital, it takes a little longer to build up an income-generating asset that will yield a growing recurring income that you can live or or than can boost your lifestyle significantly.

With a good residual income business plan, you can in fact start building your own income-generating asset from scratch, yet with no large capital investment or overhead expense needed for getting started. You can do it part-time too. And if you choose a good residual income ‘vehicle’, it can take very little time each day. But it does require determination and perseverance to stay working at it for the long haul.

Main benefits of a residual income business

  • If you’re currently earning a renewable income, as an employee or as a self-employed person, then residual income is on top of your regular earnings. That is why it is called ‘residual’ — it is what is over and above your normal needs.
  • Having such an extra income stream flowing in regularly means you can save for those extras in live that you need or want.
  • A substantial residual income can bring you luxuries you wouldn’t normally be able to afford — a home upgrade, an overseas vacation, a new car, and so on.
  • If you work at it diligently, over time your residual income can exceed your normal renewable income, so that you can decide whether you want to quit your regular work and devote more time to growing your residual income — like taking early retirement, in a way, yet growing your ‘pension’ instead of seeing it lose value.
  • Whether you take early retirement or continue your ‘day job’, a residual income takes one towards true financial freedom, where money is no longer a bind or a source of stress.
  • If you’re dependant on someone else for your income, residual income can bring you financial independence and a sense of security in your own life.

A residual income business takes one toward personal and financial freedom, debt-free living, less stress, early retirement — in other words, an improved quality of life.

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