How To Build Residual Income
Although residual income can be used to describe the sum of money you continue to earn after doing upfront work, it mainly refers to the net income you get after covering your expenses and debts.
You might have heard of discretionary income, which is money that you can spend at your discretion. Residual income is the same thing.
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Most people get paid when they trade time for money, meaning there's active work involved in generating that income.
But there are many residual income opportunities that can make you money with little effort on your part.
Talk about working smarter!
By creating streams of residual income, you can increase your wealth and gain control over your finances.
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Types of Residual Income
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Residual income can have different meanings in different contexts. Here's a look at some of the common areas that make use of this income.
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Corporate Finance
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Residual income is how you calculate profit in the world of corporate finance.Â
You can use it to identify a company's net worth by subtracting the opportunity costs of capital from the annual operating profit.Â
And if you want to know the company's equity value, you can use residual income to estimate the instinct value of its shares.
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For this purpose, you'll assess the company based on the sum of its book value and the current value of its anticipated future residuals.Â
Personal Finance
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You can also use residual income to determine your creditworthiness.
Banks and other institutions often use this income to determine whether an individual is making enough to secure a loan and cover his expenses. So if you're left with a good chunk of money after settling all your debts and monthly payments, you can demonstrate your financial standing to get approved for a loan.
Online Business
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If you set up an online business, your residual income will be the profit you make after putting in the initial effort.
Typically, there's very little work required to maintain the flow of income after the initial effort is made. Hence, in the context of online business, residual income is also referred to as passive income.
Learn how To Make 6 Figure Income Every Month
How to Make Residual Income
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Creating a residual income stream can be life-changing for everyone.
Whether you're in college or well into your career, consider opportunities that enable you to earn recurring income down the road.
And, thanks to new digital platforms, there's no shortage of residual income ideas on the table.
Here are some interesting ones:
1. Start a dropshipping store
2. Open a subscription business
3. Invest in Start Up Companies
4. Rent out your property
6. Create an app
7. Start a Youtube Channel
8. Publish a book
9. Sell photos
10. Sell digital products on Etsy
11. Build an Instagram following
12. Consider Investing
13. Build an Online Course
14. Sell Your Designs Online
15. Place an Advertisement on Your Car
16. Post content on Reddit
17. Download and install apps (eg: Honeygain, Tapestri, etc)
18. Own Vending Machines - Find out how
Robinhood is a FINRA-regulated broker-dealer, registered with the U.S. Securities and Exchange Commission, and is a member of the Securities Investor Protection Corporation. The company's revenue comes from three primary sources: interest earned on customers' cash balances, selling order information to high-frequency traders (a practice for which the SEC opened an investigation into the company in September 2020), and margin lending. As of 2020, Robinhood had 13 million users.
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While it can be tempting to want to pick 4 passive income ideas to get started with, I'd really encourage you to pick one in the beginning. It would be best if you had the time and the ability to focus to really grow a passive income stream. Master one thing before moving on to the other.
It's going to take a substantial amount of time or money in the beginning, but I promise earning passive income is everything it's cracked up to be! Pick an idea, make a plan, and dedicate yourself until that income stream comes to fruition.