Residual Income

One of the main tenets of the “American Dream” is upward mobility: the ability to have greater occupational, social, and financial success than one’s parents. This is one of the main motivating forces behind the unparalleled American work ethic that sends people to work for longer hours than many other industrialized nations, and gives them comparably less vacation time for their efforts. But people do this — year in and year out — in pursuit of greater financial success in the hope that it will help them attain that dream.

However, not all of that financial success needs to be earned in a traditional office setting. With residual income, Americans can earn additional income over a long period of time without working for it. That’s because residual income is tied to work that is done just once. It can essentially be earned perpetually — and since the work is already done, there’s no need to “put in the hours” or slave away on a daily basis to earn it.

The Two Different Types of Income: Linear

Income can essentially be boiled down into two distinct groups: linear income and residual income. When you hear the term “linear income,” you are essentially hearing a reference to the traditional way of earning money. This linear form of income is directly tied to the number of hours someone puts in at work, or the amount of commission they have made on a sale while working. If you work full-time, you get a full-time salary. If you work part time at 25 hours, you earn 25 hours worth of income. And if you happen to quit your job, the income also stops showing up in your bank account. There is no “residual” effect with this type of income, and there is no longer-range opportunity to earn money on what you produce at a traditional office job.

Because linear income can be so fickle and limiting, it’s necessary for many people to pursue a form of residual income that continues to pad their bank accounts whether or not they take a sick day, quit their job, or decide to retire early.

The Two Different Types of Income: Residual

Residual income, unlike its linear counterpart, is not tied to the number of hours you work per week, or how often you show up at work, nor if you are a salaried or part-time employee. Instead, this type of income is typically tied to ongoing income, such as royalties, from a product you have produced. It can also be tied to advertising revenue from a website that you run, or could even come in the form of interest on a savings or money market account that you hold with your bank.

It’s a greg way to get extra income every month and, if you are good enough at crafting your source of residual income, it may even outpace your linear earnings and become your primary source of earnings. But, as with all good things, there are some definitely drawbacks to earning or depending on residual earnings for your livelihood, slush fund, or retirement savings.

The Disadvantages of Residual Income

  1. Residual income is the path less traveled
    The reason articles like this one exist to explain residual income is because it’s not the typical way that most people choose to earn their retirement savings or livelihood. You will likely feel alone and without all of the answers you need if you pursue this method of savings. But that does not mean it is not worth pursuing. Indeed, accruing residual income makes financial sense: it’s an unending and limitless stream of revenue tied to something that has already been done. It’s a relatively easy way to earn extra money. And those who don’t pursue it often find that they all have one thing in common: when push comes to shove, they’re worse off financially than those with residuals.
  2. Other people love to criticize residual earners
    In America, people tend to show more respect toward money that they feel is justly earned — such as by putting in the proper amount of time at the office and working hard while on the job. But residual income takes a totally different path: you set up just one website, or write just one article or story per month, or have just one savings account — and money comes in small amounts from those initial investments of time. For some people, this indicates laziness or a lack of work ethic.

    They’ll wonder why you’re not doing traditional work to increase your savings, and they’ll assume that the initially small residual amounts will never add up to anything worth spending. They will all be wrong, however, and it’s important to remember that people always criticize things that they are unfamiliar with or find to be “weird.” Let this criticism go in one ear and out the other; as your residual income amounts increase and your savings account increases with them, the critics will fall silent.

  3. Residual income is slow to accrue
    This is perhaps the biggest drawback of residual income in a society that places a high amount of worth on instant gratification. Residual earnings are not going to add up to an amount that is even close to your current weekly or biweekly paycheck — at least not a first. It can be discouraging to find out just how slowly this extra income adds up at first. But the important thing is to be persistent and remember that this is a long-term (indeed, often lifelong) investment. Residual earnings will come in due time, and your patience will be worthwhile when they do.

Sources of Residual Income

Perhaps one of the most famous ways to earn residual income is by way of royalties for an artistic work produced. Those who are adept at writing or performing music — or even acting — can earn small payments on their work every time a copy is bought, sold, or rented. This, however, does have a large number of limitations. For example, there are many people who simply have no artistic talent to market in exchange for residual income.

Another great way of earning money that applies to people with or without artistic talent is by starting a small website or internet business that displays advertising banners and may sell products. Because this process is entirely automated, the residual earnings will begin to flow in after the website is published. And these sites require very minimal amounts of maintenance as compared to more popular blogs and news sites. Simply set up shop, check in occasionally, and enjoy the benefits of residual earnings from internet sources.

Finally, there’s the option of purchasing a rental property and adjusting the building’s rent to supply a respectable amount of monthly residual earnings. This is particularly popular among those who live in urban settings or within close walking distance to a college or university.

No matter the source of residual income, it’s important to take action as soon as possible and begin earning extra money each month. While each option has different start-up costs and fees, each one offers the same thing: an easy, relatively worry-free way to earn money for savings or retirement with minimum investment of time over the long-term.

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