Residual Income: Why Your Job Is Costing You Money
Do you dread Monday mornings? Working overtime to pay your bills, save for that holiday, or to put your kids through school? The sad truth is that most people will work away the best 50 years of their lives just to pay off a single house. That sure as hell doesn’t sound like fun to me! On the flip side, when you know how to earn the right income you don’t need to go on a holiday to get away from your life. You simply live somewhere else for a little while. And with Bloomberg predicting there’s an average of 1700 new millionaires per day in the U.S. alone, I figured it was time to let you in on the secret of residual income. Before I do, though, you need to understand how and why your job is costing you more than it’s worth.
What Is Linear Income?
Linear income is the arch nemesis of freedom and lifestyle living. Sadly, more than 90% of us earn linear income. In its most simple form:
Trading time or effort for money = Linear income
If you work any typical job, and you trade your time or your effort in return for payment, you earn linear income. Even if you run your own business or subcontract, the fact remains that if you work 40 hours a week, you will get paid for 40 hours a week. On the other hand, if you don’t show up to work- you don’t get paid! And therein lies the problem with linear income. It requires us to show up day after day, year after year, to get paid. Not to mention that in most cases it will pay you just enough to keep you from quitting, and not enough for you to get ahead of anyone else.
Now don’t get me wrong, I understand that ‘work’ can give people purpose or direction. I also acknowledge that a lot of you have probably never considered that there’s an alternative. Making the decision to do something different with your life first stems from adopting a new mindset. You have to develop yourself in order to develop your wealth, and for some people, the idea is too scary, or they are just too lazy. Bad luck. If you aren’t willing to make a change, nothing is going to change for you. So continue working your 9-5 and wishing the weekend wasn’t still days away. That is a CHOICE, and if it’s the one you make, it is entirely your prerogative.
If you’re still reading- congratulations! You have already taken a positive step, and I will assume you are willing to stand up and change your life, and the futures of your children. With this in mind, it’s time to explain residual income.
What Is Residual Income?
It’s time you stopped working for money and made money work for you. Residual income is the key to a happy life and the most powerful form of income. It lets you do the work once, and continue to be paid for it. If you want to go traveling you’ll still get paid. Want to see your kids dancing concert? Yep- still getting paid. In fact, with the interconnectivity of our society these days (the internet) you can get paid from the other side of the world while you sleep! Starting to understand the power of residual income? Good.
You are probably already aware of some of the most common examples of residual income:
- Royalties. Think musicians, authors, anywhere that your creative effort will continue to be purchased, played or used.
- Rental income. If you own a property and the rent pays you in a constant flow.
- Interest and dividends on savings and stock investments.
However! Most of these forms of residual income require incredibly specialised skills or a large sum of money already in your possession. For example, you need to have the dedication and skill in a certain creative area (music, writing, acting) to earn royalties. Moreover, to live comfortably in Australia, it is estimated that you need at least 3-5 properties (more than $2m) paid off to survive off the rental income. Furthermore, to earn a substantial amount of interest you need an incredibly large savings account, and stock markets can be volatile at the best of times. So how the hell do you create residual income?
Leverage and Compounding
There are two simple concepts to understand when building a residual income stream. The first is leverage, and in particular, leveraging your time. Under normal employment circumstances, your time is worth a set wage (so many dollars per hour). The only way for this to change is if you receive a raise or move company, and yet your earnings are still capped by the set dollar per hour amount. With time leveraging, however:
“your time spent at work becomes increasingly worth more and more. Unlike fixed-salary employment, leveraged income has no upper limit.” Azam 2017
Meanwhile, the concept of compounding is much the same as compound interest on a savings account. You generate earnings off an asset- say your savings- and then reinvest those earnings by adding that additional income into back into your savings account. In this way, you continue to generate increasing income as you have increased the value of your savings.
Compounding is the process of generating earnings on an asset’s reinvested earnings. Investopedia
So by leveraging your time, and compounding the result, you are able to build a substantial residual income as the value of both your time and investment have no ceiling, and will continue to increase. The best investment you can make for both leverage and compounding, however, is in people. Let me explain in real world terms.
Give Me an Example
Think back to your time in school. You probably had some great teachers and some who showed up just to get paid. Now imagine this scenario. Your teacher has the chance to earn a percentage of anything you earn in the future. They have just become financially motivated to teach you to the best of their ability! The more time they invest in teaching you will not only ensure that you earn a bigger income, it will also ensure that they continue to increase their earning power from you. I think it’s pretty safe to assume your education would have been the most supportive and well rounded that it could possibly get, right?
Now say that you have the same opportunity. You get to earn from anyone you take under your wing and help to build their own income. In doing so, you earn off their work, and your teacher continues to earn off your income. See where this is going? This is the power of leverage and compounding. Every person has the ability to build their own substantial income, and each person’s investment (both monetary and time) at the beginning is also what compounds to generate your residual income down the line.
How Do I Create Residual Income?
The best way for normal people like you and I to generate residual income is in Network Marketing. Aside from the fact it is endorsed by some of the biggest names in business and entrepreneurship, network marketing (also called referral marketing) is something you already do. Ever recommend a movie to a friend who went to see it? How about a great restaurant that they went and tried based on your glowing review? Network marketing is a person to person recommendation and interaction that you get paid for! It is truly the only way for normal people like you and me to generate residual income. But you must be a student before you can be a teacher.
If you haven’t quite caught up yet, the example I gave earlier isn’t made up. Network Marketing allows you to earn from your own efforts AND from the efforts of the people around you. It also gives every person in your organisation the same opportunity for growth. In this way, you are no longer restricted to earning an income off your own back, and you are able to lift your network to new heights.
“I would rather earn 1% off other peoples efforts than burn 100% of my own”- John D. Rockefeller.
The trick to earning a real residual income from network marketing stems from choosing the right company. Keep an eye on this space for advice on that in the near future! In the meantime begin to understand some of the reasons people fail so that you can get started on the right foot, and begin your journey to a brighter future.