Wednesday, August 15, 2012

How To Get That Elusive Residual Income

Residual income is like a unicorn or leprechaun…you hear about it all the time but never see it yourself. Many people encounter the topic of residual income while reviewing work from home opportunities. They discover that they can earn money year after year with only a small amount of initial effort. While many home based businesses do have a residual earnings component, the truth is that a venture that requires effort to create will require some effort to maintain or grow.

A company usually promotes a residual income feature when it provides minimal compensation upfront. This is a problem because you need enough income to cover business expenses including advertising and operational costs. A company that holds out the long-term residual carrot wants to get your efforts today in exchange for payment tomorrow. In many cases, that payment will be much less than expected or will never come.

There is nothing wrong with a business that has a residual effect regarding earnings. However, a company would never foster an environment where its best workers could retire and earn lucrative income for the rest of their lives without doing any work. The company may seem to promote lack of work but what business would really compensate people well for not working for it?

Insignificant upfront pay and direct payment from a company are the two reasons that most people do not create residual income. These individuals are not self-employed, they are employees. Therefore, they are affected by the decisions the company makes and they are subject to changes in compensation plans over the years, regardless of their efforts or length of service.

Self-employed individuals receive payment directly from their clients. Only they and their clients control the future of the business. There are no politics and decisions handed down by a third party to get in the way. Residual income does not keep moving further into the future once the individual has almost reached the point of achieving it.

In order to develop real residual income, an individual must have a home business that enables him or her to earn enough income upfront. This income must cover bills as well as business and personal debt. There should be enough money left over to invest in things like real estate and stocks that pay dividends, adding to the amount of future residual income. This allows people to replace a lagging form of residual income, if necessary. For example, if a dividend stock stops performing, they can invest in another one.

If you want to earn strong residual income, you must be self-employed and be able to earn money upfront today. This enables you to pay off debt, reinvest earnings, and create financial security for the future. Do not fall for those offers that promise residual income for being a contracted distributor for a product or service. Look for ventures that enable you to control your future from both business and earnings perspectives. Only then will you truly be free to enjoy life after your working years.

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