So what is residual income?
There are a few definitions:
- The amount of money you have left after paying all essential bills (often called disposable income).
- A system for defining a company’s value (very technical!).
- Net income from an investment.
- Royalties paid to the owner of intellectual property – books, music, patents etc.
The last two are the interesting ones, at least to me. Both generate an income long after the actual work has been done. This can be from earning and saving enough to invest, or from creating something which will produce an income in the future. At the moment, it’s not so easy to make a good income from investments, interest rates are so low. Property is one route which works well for some people, but it doesn’t really interest me, and you do need some startup capital. I’ve never written a book or song or made a record (thank goodness, say all my friends) but I do have a residual or passive or royalty income from my business, as do lots of my colleagues and others in our industry.
How do you create it?
How does that happen? The principle is the same as for, say, an author. You put in the work now and create something new, something which will last. You get paid based on its success. Build a team, coach and mentor them to build their own business, pass on your skills, and help them achieve their goals, whatever they may be. The company will pay you for creating that business for years into the future, for the rest of your life. The most amazing thing is that you can even leave the income in your will, and provide a legacy for your family, or for whatever cause is important to you. So you get paid in the future for the work you do today, and it carries on benefiting others after you’re gone, what a powerful gift! Or you could try for a top 20 hit, good luck with that one!
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