The Basics of Residual Income
The Basics of Residual Income
The Basics of Residual Income
In order to know what residual income is, you need to
understand what linear income is. Linear income is the kind
of income that people have today. Linear income is the pay
that you receive whenever you work. This type of income
continues only as long as you work. Once you stop working,
the cash stops flowing. Residual income, on the other hand,
is based on something that you did in the past that still
helps you make money long after.
What are examples of residual income?
1) Royalties - This is often the term used for the residual
income that an artist or an author receives. Authors who
write a book often make a deal with the publisher to give
him or her a percentage of the books sales. If the author
wrote a truly great book, then that author would continue to
receive income from that book long after it has been
published. Royalties are often paid per annum and are
computed based on the amount of sales that the books has
enjoyed. This means simply that as long as the book is sold,
then the author would have an income. This also goes the
same for hit songs. Think of Elvis Presley: his residual
income continues long after his death. In fact, his residual
income is enough to support his descendants.
2) Dividend - These are shares of income distributed by a
corporation to its stockholders. If you invest enough money
in a corporation, you could enjoy the dividends that your
stock can bring you. In this type of residual income, you
get to enjoy the benefits of making a smart investment as
long as the company exists but you do not have to work for
that income. Dividend income, though also depends on the
actual company since it is up to the company when to declare
dividends.
3) Interest - When you lend money, it is only natural that
you charge interest. In this type of residual income, you
don't have to work to get your income, you merely have to
wait for the debt to mature and you can collect your income.
This is the most commonly used type of residual income
today.
4) Commission - This type of residual income is made use of
by multi-level marketing companies in order to attract more
customers.
This is how this works: let's say Mary has joined a company
which sells soap. Mary paid the company one dollar in order
to get the right to sell and to recruit. Mary recruits John.
John, of course, pays the necessary one dollar fee. As a
commission for Mary, she receives residual income from the
one dollar that John paid. As an addition to this, she gets
another percentage for every recruit that John makes and a
percentage for every recruit of every recruit and so on.
Because of recruiting John, Mary now has a residual income.
By recruiting John she can now enjoy having an income
without actually selling the soap.
Residual income sounds great, doesnt it? Well, what you
need to understand is that you have to be very careful not
to fall into scams. You need to truly understand how
residual income works before you try to reap its benefits.
If you dont you might end up wondering where all your money
went.
For more information about Residual Income be sure to follow
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