I believe you’ll agree when I say that the days of placing all our financial eggs in one basket are over. If the current international economic and financial dilemma has taught us anything, it has taught us to diversify our income streams. Working for one employer nine to five for 30 or 40 years and then comfortably retiring with a secured pension is largely a dying dream.
It is up to all of us to take care of our own financial future. Have you seriously considered harnessing the power of passive and residual income?
Passive/residual income enables you to make money without physically working hours for an income. Passive/residual income is when your money is working for you, even while sleeping or on vacation. A key to wealth is to secure multiple streams of passive income.
Here is a simple definition of passive and/or residual income: Sources of income in which the earner does not take an active part.
How do you achieve passive/residual income? Enjoying passive/residual income doesn’t happen overnight. Like any wise financial investment it takes time to investigate and develop. If you’re looking for a “get rich quick” scheme, then passive income is not the answer. Passive/residual income is a careful and well thought out process of building diversified streams of income.
Here are three examples of passive or residual income:
1. Network marketing / direct sales – This is often the first introduction many of us have to concept of residual income. You build a team of like-minded people for which you are paid a percentage of your team’s business growth. A common phrase you’ll hear in network marketing is “build it once and get paid for years.”
Food for thought: Look long and hard at the company with which you’ll want to grow a business. Ask questions, ask for references, speak to current company members as well as past members and make time to read comments posted on the Internet about the company.
2. Rental income from property – This is one of the most common ways to create passive/residual income. You buy income property and receive income in the form of rent. You’re building equity in the property while earning income.
Food for thought – You are a landlord. That means you are in charge of repairs and other responsibilities of owning property.
3. Royalties from a book, music or other intellectual property or by the licensing of a patent – As the author, inventor or composer you are entitled to a percentage of the current and future sales of your intellectual property.
Food for thought – Many authors never see royalties because not enough copies sell to cover the advances and other costs. Read all agreements carefully and make sure you understand exactly the royalty percentages and terms.
General thoughts about passive income: As with all investment of time, energy and money, investigate your income streams very carefully. Do your homework! There is financial power in passive income when you know how to earn it properly.
Some best-selling books covering the subject of passive and residual income:
- Your Money or Your Life – Vicki Robin, et el
- Rich Dad Poor Dad – Robert Kiyosaki
- The 4 – Hour Workweek – Timothy Ferriss
- Multiple Streams of Income – Robert G. Allen
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