Residual Income Can Be Your Key To Wealth

Residual Income Can Be Your Key To Wealth



Residual Income Can Be Your Key To Wealth
Are you standing at​ the​ door to​ wealth but can't seem to​ find the​ right key?
There are many keys on the​ key ring that can unlock the​ door to​ wealth, but you have to​ know which ones they are and​ how to​ use them correctly.
In this article I'll focus on the​ residual income key that many have discovered can be used to​ enter the​ inner sanctums of​ the​ wealthy.
But before I​ go too far, I​ should probably define what I​ mean by residual income, (also called passive or​ recurring income).
While there are perhaps a​ number of​ definitions for​ residual income, I​ will be using the​ term here as​ follows:
Residual income is​ income that continues to​ be earned after the​ initial effort has come to​ an​ end .​
In other words, it​ can be thought of​ as​ the​ process of​ making a​ sale one time but getting paid over and​ over again.
How can this be? That is, how can you make one sale and​ get paid over and​ over again? Well, let's take a​ look at​ some common examples of​ residual income.
An insurance policy .​
When you buy an​ insurance policy, you normally pay premiums monthly, quarterly or​ annually .​
You made one purchase, but you continue to​ pay as​ long as​ you maintain you policy .​
The insurance company earns a​ residual income from you.
A service subscription such as​ a​ pest control, lawn maintenance, or​ web hosting contract .​
When you purchase a​ pest control, lawn maintenance, or​ web hosting service you normally again pay a​ monthly, quarterly, or​ annual fee .​
As long as​ you continue your service, you continue to​ pay the​ fee .​
The service company earns a​ residual income from you.
A membership subscription such as​ to​ a​ membership Website or​ a​ club .​
To continue your membership, you much continue to​ pay membership fees .​
The membership entity earns a​ residual income from you.
In all of​ the​ above examples, the​ sale was made only one time, but you continue to​ pay the​ company over and​ over again.
Residual income is​ distinguished from linear income, where a​ single payment for​ a​ single one time purchase is​ made .​
For example, if​ you have an​ hourly job, you are exchanging one hour of​ your labor time for​ an​ hourly pay rate .​
You must work each hour to​ get paid .​
If you stop working, you stop getting paid .​
Your income is​ linear.
However, if​ you sell memberships to​ a​ Website and​ your members pay a​ monthly fee to​ belong, then you continue to​ collect their monthly fees as​ long as​ they continue to​ remain a​ member .​
You made the​ sale one time but continue to​ collect an​ income long after the​ initial sales effort was completed .​
This is​ an​ example of​ residual income.
Which would you rather have, a​ residual income or​ a​ linear income?
Generally, whenever possible, you should try to​ earn a​ residual income that will continue to​ grow over time as​ you make individual sales .​
If you put in​ a​ consistent effort toward earning a​ residual income, you will find that your income will compound itself as​ the​ amount of​ residual income continues to​ grow.
For example, let's take a​ look at​ the​ difference between selling a​ $29 .​
ebook and​ a​ membership to​ a​ Website with a​ $29 monthly fee .​
We'll assume that both sellers began their sales effort on 1 January and​ continued the​ effort for​ six months.
With the​ sale of​ each ebook, the​ seller earns $29 but then has to​ make another sale to​ earn another $29 .​
Hopefully, the​ seller has some backend or​ follow on products to​ sell to​ each customer in​ the​ future, but many do not .​
So each sale stands alone .​
Let's also assume that the​ cost to​ make each sale (including Web hosting fees, merchant card fees, advertising, etc) come to​ $4 per sale .​
Our merchant thus earns $25 net per sale .​
We'll assume that 10 sales are made per month so over the​ six month period he made 60 sales .​
So for​ 60 sales, he has earned $1,500.
Now, let's take a​ look at​ how the​ membership site might do.
Each membership sells for​ $29 per month and​ the​ cost to​ make each sale is​ the​ same $4 per sale so the​ site owner earns the​ same $25 net per initial sale .​
However, he continues to​ earn the​ $29 each and​ every month that the​ buyer remains as​ a​ member and​ there is​ no sales cost for​ the​ subsequent months .​
We'll also assume that our membership site makes 10 sales per month and​ that each buyer remains a​ member for​ 4 months on average before dropping their membership .​
Now lets take a​ look at​ the​ numbers.
Month 1 = 10 sales for​ $250
Month 2 = 10 sales for​ $250 plus $290 residual income
Month 3 = 10 sales for​ $250 plus $580 residual income
Month 4 = 10 sales for​ $250 plus $870 residual income
Month 5 = 10 sales for​ $250 plus $870 residual income
Month 6 = 10 sales for​ $250 plus $870 residual income
The total income for​ the​ six months comes to​ $4,980 plus there is​ still a​ continuing income that will come in​ from sales that were made during months 4, 5 and​ 6.
Which would you rather have, the​ $1,500 made as​ linear income or​ the​ $4,980 plus earned through sales with a​ residual income tail? the​ sales effort was the​ same.
As you can see from the​ above example, residual income can quickly surpass linear income if​ your sales effort remains constant .​
So, keep on the​ lookout for​ good residual income opportunities, they can be your key to​ opening the​ door to​ increased wealth.




Related Articles:




Powered by Blogger.