Residual Income – The True Path To Wealth?

Why Building Residual Income Advances Your Journey To Wealth


Residual income (sometimes referred to as passive income) is income that you receive from sources requiring little or no work to maintain it's inward flow.

This differs from an Active income that a vast majority of the population aspire to, by trading time for money!

As an entrepreneur you should always be thinking in terms of generating residual rather than active income.

So why is residual income so important?

Because with active income you will always be limited in what you can earn because of personal time restraints. For example, say you were being paid an hourly rate of $40 and you work an 8hr day, 5 days a week with 8 weeks holiday a year, then your salary would be $103,000. Not bad, but unless you work overtime that would be your limit.

With residual income, there is no limit to the amount you can make. The considerations are how much time investment is required to initially to get an income generating project started and how many different projects you can set-up and maintain at once. What is more important though, is that your income is not restricted by the hours you work!

So what types of residual income sources are there that you can get involved in?

Here is a list of ideas that will get you started. These are generic ideas as there are an infinite number of variants which you could come up with and I wouldn't want to limit your vision by making specific suggestions.


Probably one of the oldest and most well known forms of residual income are Royalties. These are normally associated with published works and intellectual property. For example books, ebooks, music, lyrics,Dollars in the books, isolated on white background, business tra inventions, etc. There are other types of royalties that apply to non-renewable resources such as oil and minerals, but I'll not be covering those here.

As an author, composer or inventor you would typically put in an huge amount of initial effort to develop your ideas and craft them into a format that can be duplicated and distributed. You would then charge for a license to use or sell these creative masterpieces, thus receiving royalties normally based on a percentage of the gross or net revenues generated from their use or sale.

Once an asset of this type has been created, the royalties continue until such time as the license expires.

Automated Sales

Developing an effective sales system is a great way to simplify and streamline an existing sales process and allows you to determine more readily what can and cannot be automated.

A systems can also be duplicated which also makes it easier to apply to similar processes that you may have in your business.

Obviously the more a process is automated, the greater will be your residual income, and what's really great is that the Internet lends itself to automated systems. An online marketing funnel is a great example of a fully automated income generating system and designing and building an effective funnel is relatively straight forward to do!!

Subscription Programs

Subscriptions are the monthly, yearly or seasonal payments made by your subscribers in return for access to an ongoing supply of valued information, educational material, product updates, etc.

Generally subscriptions fall into four categories:

  • Fixed subscriptions are usually applied to magazines, periodicals or a specified set of goods or services provided over a defined period of time, e.g. a years subscription to a popular magazine, or series of items that are delivered monthly as part of a collectable set.
  • Infinite (or evergreen) subscriptions that usually apply to on going memberships. For example, a membership website or membership to a club or society.
  • Pay-as-you-go subscriptions where subscribers pay for the use of a product or service on a monthly or annual basis depending on their needs.
  • Basic access subscriptions that apply to the use of products or services at a basic level and then additional charges are applied for any additional usage. This is how most phone companies apply their subscription tariffs, for example.

So if you can apply the subscription model to your business, ideally an evergreen subscription rather than a fixed, pay-as-you-go or basic subscription, then you have a great source of residual income.

Property Rental or Leasing

ToLetThis is a fantastic way to turn an investment into a residual income stream. Buy a residential property and rent it out, or buy a commercial property and lease it out. You are limited by how much you have to invest initially , but there are ways and means to achieve anything.

Now, I'm no property expert and I certainly don't have the experience or knowledge to advise on this complex subject, but I do know there are many superb programs available that will enlighten you in this field.

Here is a great site I found on the subject of property rental (geared around the UK buy-to-let market).
Although the site is for the UK market, It has some excellent articles on the subject of property rental generally and the site's author documents his own experiences over the 5 years or so that he's been letting.

Stocks & Shares

Investment in a portfolio of long term stock, shares, etc is a traditional (albeit a somewhat risky pursuit).

I certainly don't have the experience or qualifications to advise you on the stock market or any sort of investment advice, but here is a site worth looking at:

Residual Income - Motley Fool



( or for the UK market )

In their own words:

Founded in 1993 in Alexandria, Va., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king — without getting their heads lopped off.


Network Marketing

Network Marketing, Multi-Level Marketing (MLM) or Direct Selling programs are all terms commonly used to describe an excellent business model that can truly generate a residual income. However it must be stressed that despite all the hype surrounding the income claims of some network marketing companies, building a business to the stage where it becomes a self perpetuating organisation that generates a continual flow of income, requires a lot of dedicated and hard effort initially. That said, when it does, the rewards far out weigh the struggles….. if done right!
Here is what Robert Kiyosaki has to say on the subject:

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