Continuing to help you understand the benefits of making money, than loosing it - more excerpts from my forthcoming book (all notes are copyright 2008)

Know the Value of Residual Income

There are a number of you who may be trapped in a 9 to 5 job. You’re stuck in your desk, in front of your PC, and the only free moment you have will be your 15-minute break and your lunchtime. If you’re in a home-based business and you’re working on your own, you may be spending almost the same number of hours as those who are in the office, even if you can say that you have flexible hours. The bottom line is this: do you have any dream of working 70 to even 100 hours a week for the rest of your life? I would definitely say no to it! And I absolutely believe that neither will you. But what option do you have? You better concentrate on earning some passive income.

What do you mean by passive income?

The best way to define passive income is to differentiate it with active income. According to Gary Keller, Dave Jenks, and Jay Papasan, authors of The Millionaire Real Estate Agent, active income is something that you can earn when you work for it. That means you do a particular job, and you get paid for your time, effort, and services. On the other hand, passive income is something that you gain without putting minimal effort at your end. The money actually comes from your investments and other businesses, which could be run by other people (Keller, Jenks, and Papasan). Does that mean that you don’t have to work hard for your passive income? Actually, no. However, you absolutely know that the time you spend to obtain your residual income is far lesser than when you work to get your active income.

What are the benefits of residual income?

I have eight good reasons why you need to work for a residual income:

1. It requires the least effort from you. As mentioned earlier, passive income wouldn’t come to you unless you make some effort beforehand. As a matter of fact, you should work the hardest at the earlier part of your business or investment. Nevertheless, the pain and hardship will only be at the early stages. Later on, all you have to do is to welcome income into your bank accounts and pockets. A good example will be in real estate. If you plan to rent your apartments, you need to purchase a land, design the apartments, perhaps furnish them with furniture and fixtures, and then promote your property in the market. However, once you can find people who will rent your properties, your job basically goes down to almost zero. You simply have to wait for your tenants to pay their rental fees.

2. Time can be extremely flexible. With passive income, you don’t have to consider any time frame. You can opt to work a 9 to 5 job or not—it depends on you. After all, residual income doesn’t really rely on time at all.

3. You can always expect an increase in your pay. It becomes very convenient for you to boost your earnings by simply building various income streams for your business or investment. This could also mean diversification of your portfolio.

4. There’s no limit as to how much you can possibly earn. Is it really possible? Yes, it is, more particularly when you talk about residual income. For instance, you may make use of the savings from rented properties to invest in more lands, houses, and other kinds of real estate properties.

5. You will have something to give to charity. Are you one of those who are blessed with a good heart? Oftentimes, no matter how much you want to share your financial blessings to those who are in need, it is impossible. Or else, you will not have enough money to save or spend for other necessities. However, if you have passive income, you can make use of the money to contribute to charitable organizations. Your active income, meanwhile, will be the one that you’re going to utilize for your daily needs.

6. There’s money for you during retirement. What could be the worst-case scenario once you’re already out of work or that you don’t have the energy to handle your business anymore? What’s going to bother you is where you will get your source of income. You cannot look for other work, as there are more competent and stronger individuals out there who could be more fitting to perform the job that you desire. Fortunately, since there’s no duration when it comes to when you will continuously receive passive income, you can utilize it even when you no longer have your own stable job or business.