What is Residual Income? How to Make Money Without Working
Learn what residual income is – it’s how I keep my Quips and Tips blogs going! Here’s how to make money without working. These tips for creating residual income streams aren’t just about blogging. They include a financial expert’s advice on making money with other sources of passive income, such as vending machines or rental real estate property.
Before the tips, a quip:
“If you’re looking to get-rich-quick with no effort, press the back button right away!” say the folks at BillionDollarIncome.com. “To learn how to make money online and use passive income opportunities to achieve financial freedom, you will need to put in effort. But if you work smart, you will soon create a steady flow of passive income that will accumulate like a snowball and last you a lifetime.”
Despite the ads, there really is no such thing as “get rich quick” or “make money without working” — unless you find something you love to do. I make money without working because I love my Quips and Tips blogs so much, it doesn’t feel like work. If you want to earn passive income without working, you need to learn how to work smarter. The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich is a fantastic resource for residual income; my husband and I love that book.
And, here’s the definition of residual income, plus a few questions to ask if you want to create a stream of passive income…
What is Residual Income?
Residual income is sometimes known as passive income, partly because it’s “what’s left over.” Here are a few definitions:
- Passive income is an income received on a regular basis, with little effort required to maintain it.
- Passive income is the excess of controllable operating income over a “minimum” amount of desired controllable operating income.
- Residual income is the net operating income that an investment center earns above the required return on its operating assets.
- Residual income is the amount of money left over after you have paid all of your ordinary and necessary debts including the mortgage.
No matter how you define it, passive or residual income is about making money without actively working at it. My Quips and Tips blogs are a source of passive income, because I earn money from them while I sleep, go on vacation in Hawaii, and work at other things.
Types of Passive Income
“My favorite form of passive income would have to be rental real estate,” says Brandon Wilkins, author of Getting Rich is Simple…But It Ain’t Easy! “Depending on the number of units you have, the cash flow is higher. And it is consistent (monthly). Once the property is occupied, you can outsource any maintenance or repairs that need to be done. You can even outsource collection of revenue (through a property management company), though I don’t recommend this right away.”
Like Wilkins, my brother in law’s favorite source of residual income is rental real estate. He owns at least two apartment buildings in Edmonton, and I suspect he has other different types of rental properties. He’s not into making money online or blogging — which is too bad, because I think it’s the best source of passive income! Learn how to blog, and you’ll learn how to make money without working (if you love blogging).
I share my blog secrets in 75 Ways to Make (More) Money Blogging.
Other examples of residual income include vending machines, self-serve car washes, dividend income, royalties, ebook sales, and money market accounts.
How to Make Money Without Actively Working
Have you researched the business you’re interested in?
Make sure your projected income will cover your overhead and expenses, even if the economy tanks. “The sales numbers I needed to meet expenses for my self-serve car wash decreased, and became not profitable,” says Wilkins. “I got rid of it, but I’d buy a self-serve car wash again in a different economy.”
Can your business earn residual income if you’re not doing anything?
If your idea or source of passive income can’t operate without you, then you won’t be making money without working! For instance, some people argue that a blog like Quips and Tips isn’t a source of residual income because I work on it. They say that a website that needs no maintenance is a true source of passive income, because it makes money without anybody working on it.
For more tips on making money without working for it, read Money and the Law of Attraction – 4 Ways to Attract Wealth.
What is the most profitable type of passive income you can find?
Wilkins says small vending machines – the ones that dispense a handful of candy for a quarter – are one of the most profitable ways to make money without working. “You can buy one of these machines for around $50 and stock it for about $10,” says Wilkins. “All you need is a location with foot traffic. People don’t think twice about spending a quarter on some candy or nuts.”
Are you willing to do some work to earn residual income?
Unless you create a maintenance-free website or can afford to buy a real estate property and hire a manager, then you need to work on your business. For instance, if you own a vending machine, you’ll have to service it once every two weeks – or maybe more, if it’s doing high volume.
Should you pay someone else to manage your business?
If you can afford to hire someone to work for you while you work at other things — or take Ferriss’ advice in The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich and retire for most of your week — then it’s better to pay to get it done. For instance, I hired bloggers and editors for my Quips and Tips blogs, until it became too time-consuming. Another example of passive income is buying a vending machine and hiring someone to maintain it for you.
Residual income is a fantastic way to make money without working — but it does take some time and effort to get started.
For more tips, read 6 Ways to Increase Your Money IQ and Attract Financial Abundance.
Do you have thoughts about passive income, or making money without working? Please comment below!
Brandon Wilkins is the co-founder of Financial Freedom Builders LLC, and is available for coaching, workshops and seminars designed to help you take control of your finances.