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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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