Are you stressed out by your paid-by-the-hour job? Do you feel like you’ll never make a substantial income? Then you should take some time to learn how residual income can help you relax and increase your profits at the same time. Are you ready?
Linear Income vs. Residual Income
The Definition of Linear Income
With linear income, you do work and get paid once. Pretty simple.
Like many of you, I was raised as a kid to produce linear income. I was told by teachers that the way to make a living was to go to college, get a steady paying job, and support a family. All of that is great, but the “steady” part led me to believe that I had to make a linear income–doing the work that would pay me once for the effort involved. I believed that the only “steady” paying jobs were the ones where income was immediately realized yet low in compensation.
So, I took up several jobs where I was paid by the hour with no chance of a reoccurring income. I’d work for my $10 per hour and then consider the transaction finished.
Many years later, I’d discover something entirely different–something called residual income. This proved to be pretty exciting.
The Definition of Residual Income
With residual income, income is generated on a reoccurring basis after the initial effort has been expended. This is a bit more complicated to learn and implement.
I first realized the power of residual income when I started working part-time from home. I had written a few pieces online that were earning some advertising revenue–long after I finished the work. These small victories showed me the value in trying to obtain residual income. Although, at that time, I didn’t know what to call it.
Yesterday I listened to a podcast by Dan Miller, author of 48 Days to the Work You Love: Preparing for the New Normal. In it, Dan explains that he vastly prefers residual income as opposed to linear income. He is always evaluating new opportunities to see whether they would provide him the reoccurring income we’re talking about.
The only problem with residual income is that the income sometimes takes months or years to be fully realized. Linear income, on the other hand, often has an immediate payout. This is not always the case for residual and linear income, but I think you’ll find it is often the case.
How to Make More Residual Income
The podcast by Dan Miller got me thinking about ways I could start making more residual income. Also, I started to question whether or not I should only seek work that pays on a reoccurring basis. How might I make that transition? What’s a good balance?
Differentiate Between Your Linear and Residual Income Opportunities
The first step in making more residual income is to list all your job opportunities–current jobs and potential ones–and determine if they are linear in nature, residual in nature, or a little of each.
For some of you, listing your jobs is going to be easy, as you only really have one income source. For those of you who are self-employed at least part-time, you might have a handful of different types of jobs to bring in money. Just write down everything.
Next, go down your list of jobs and identify as many residual income opportunities as possible. You might find that the potential opportunities you’ve identified lead to even more ideas.
Eliminate Some Linear Income Opportunities
I work in a variety of different capacities online. I won’t bore you with all the details, but some of the work I do provides linear income while other work provides residual income. Writing a product review for my website can produce residual income, while writing a non-linked article for another website produces linear income.
If you ever decide to learn how to make money with a blog, you’ll find that the Internet holds many residual income opportunities–but you can also find yourself with a lot of linear income opportunities as well. This is what happened in my situation, and now I understand that in order to succeed in the longterm I’m going to have to continually evaluate whether an opportunity is residual or linear in nature. The point here is that I know I need to let go of a few linear income opportunities in order to take on the residual ones.
By the way, if you’re interested in becoming a professional blogger, I’d recommend checking out Blogging Your Passion University (founded by Bob Lotich of ChristianPF.com and Jonathan Milligan of CPACareerCoach.com). It is currently helping me identify the most important blogging practices, and know it will help you as well.
Transition Income Models Very Slowly
If you’re like me and want to transition from a completely linear income model to a mostly residual income model, I’d recommend making the transition slowly. The last thing you want to do is jump ship into the icy seas of a risky business venture. Test the waters first.
For example, if you have a full-time paid-by-the-hour job and want to start experimenting with making some residual income, perhaps you should cut your hours down to part-time if you can afford it and get your feet wet by trying some residual income opportunities. Once you’ve successfully created a reoccurring income, it will be easier for you to pursue even more residual income opportunities.
Remember That Linear Income Isn’t Bad
By no means am I saying that linear income should be avoided at all costs. After all, if you can find a high-paying job you love that compensates you based on a linear income model, go for it! There are still a select few linear income jobs I still hold that provide excellent income. But I’m going to ensure I don’t overwhelm myself with jobs that pay only one time–I prefer those opportunities that provide reoccurring income!
Ultimately, you have to determine how much of each form of income is right for you. Everyone’s ideal work situation will be different, so figure out what best suits your time and talents.
Are you as excited about residual income as I am? I truly believe that if you try and focus on working on projects that will continually provide an income, you’ll live life with less stress and with more money in your wallet.
What residual income opportunities do you have? Brainstorm some ideas in the comments below and let’s explore this topic together.