Are You Earning Linear or Residual Income?
by Dave Mauder
“Residual Income.”
You’ve probably heard the term used a few times from people marketing business opportunities.
But does anyone REALLY know what “true” residual income is? Before going on, let’s define what we’re talking about.
You must first understand that most of us are earning “linear” income.
Linear income is what you get when you go to work and get paid once for your efforts, as in an hourly wage, salary, commission, or a fee. It’s trading time for money.
Many of us are content to do this over and over, throughout our entire lives. In fact, most of us are raised with the belief that to make extra money, you get a 2nd job. Then you get to retire at 65 and earn more linear income called Social Security.
So what other choice is there you ask?
It’s the secret of the wealthy, and it’s called residual income.
Residual income is what you earn when you work hard once and get paid for the rest of your life, whether you are working or not. It means you invest time and/or money once, and then get paid forever.
One of the most common means of developing residual income is called network marketing, but don’t let it confuse you. This is where you sell a product or a service for a company, and then recruit others to do the same. The idea is that you benefit from everyone’s combined effort, and you eventually retire while your paycheck continues to grow.
In reality, very few people ever achieve success in network marketing, and the real downside is that it is not TRUE residual income.
What happens when you’ve put your blood, sweat and tears into building a particular business for 5 or 6 years, and then the company pulls the rug out from under you?
I’ve seen it happen time and time again. Companies change focus, dissolve their network marketing divisions, go out of business, or a hundred other possibilities.
Any one of these things equates to the end of your “residual income” - and it can happen overnight! Heck, it has even happened to me.
On the other hand, true residual income is achieved when you take the money you earn, whether through a job or a business, and you invest it.
Investing your hard earned money in income producing assets (stocks, bonds, real estate, etc.) is the only way I know of to eventually reach a point where your existing money can earn enough new money to support the lifestyle you desire.
Now, that is TRUE residual income!
Imagine being able to work if and when you want to because you have the security of knowing your money is working hard for you in a good investment plan.
Whether you are earning linear income working at a job you enjoy, or you are working in your own business, you would have the peace of mind knowing it could all disappear tomorrow and you would not be affected.
At this point you might be thinking, “I don’t have a million dollar investment to live off of, and it could take years to earn that much”. Believe me, I understand your concern.
I don’t have a million dollars invested yet either, but I’m working on it! It really doesn’t take as long as you might think if you understand the power of compounding interest.
What I’m suggesting here is that you must begin now to develop a sound investment plan. Time is always on your side when it comes to investing, and there is no time like the present to get started.
If you currently carry a lot of consumer debt, then your best investment is to start eliminating it. The idea is to eventually reach the point where you are debt free and investing at least 10% of your income.
If you’re thinking there’s no way you could do that right now, just sit down with your wife, significant other, business partner, or just yourself, and consider what would happen if your job or business disappeared tomorrow. Could you pay the bills for more than a month?
If the answer is “NO”, then you must take action today!
There is no way I can express the good feelings of security and accomplishment that come from being able to watch your money grow year after year in a sound investment portfolio.
The only way I can share that feeling is by encouraging you to join me in the fight for financial freedom!
In a future article, we’re going to talk about another way of creating residual income. We’ll discuss the difference between working ON your business and working IN your business. This is a key distinction that will have you looking at your business in a whole new light!
Until next time, remember this…
Failing to plan is the same as planning to fail.
Now go out and make something happen!
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Attention! Webmasters / eZine Publishers If this box is displayed at the end of any article, you are invited to use the article in your electronic publication or website. The only requirement is the inclusion of the following tag line (with live links) after each... * Article by Dave Mauder of Mauder's Money Matters. Visit http://www.mauder.com and learn why financial ignorance is no longer an excuse for being broke and in debt. |