What is Residual Income?

A common term which one hears on financial forums is that of “residual income”, sometimes also known as “passive income”. So exactly what is residual income, why might you want some for yourself?

The easiest way to define residual income is to consider it in contrast to a good old-fashioned job. If you work at a job, you earn money either on an hourly, weekly or monthly basis. If you want to earn more money you need to work more hours. Conversely, when you stop working, you stop earning money. If you quit your job tomorrow, your wages would also stop with it obviously.

But residual income is rather different. With residual income, you do some work once, and then you make money from it for a long time. A perfect example would be the ongoing royalties that a writer gets after creating a book or a piece of music. So long as people keep buying the product, they keep on earning money. This is how our pop sensations got so rich.

But of course the chances f you or I having a runaway rock music career are slim, though there are still plenty of things we can do to earn residual income.

One great example is creating a website that receives traffic from the search engines on autopilot. You build and retain ownership of the site but don’t actually need to do anything after then. A visitor finds your site in the search engines, reads through your site, and ends up buying something you are promoting on your site. As a result you make money. Yet you built the site months ago and haven’t touched it since. That’s residual income for you.