Knowing the difference and how to leverage residual income vs. linear income if utilized properly could change your zip code for the better.
What is Residual Income?
Residual income is a perpetual source of income that is earned from doing something once (e.g., investment, direct sales, network marketing, etc.).
Residual income is built up over time and should not be viewed as a get rich quick scheme.
Because residual income is considered the income of the rich many have been enticed by pyramid schemes. Do your research before getting involved in any opportunity, whether it is too good to be true or not.
Note: A traditional business takes about 3 -5 years to start turning a serious profit. The same can be said for moving up the ranks in the residual income world. Most new start-ups go out of business in the first 3 years due to improper guidance, poor management, poor due diligence or impatience. Taking the time to do your due diligence is key to the success of your business.
Many have gone on to become millionaires from residual income after putting in years of sweat equity.
Professions that benefit from residual income are real estate investors; stock market investors; network marketers; actors; authors; franchisers; publishers; songwriter; insurance sales person; etc..
What is Linear Income?
The majority of the world (approximately 90%) is accustomed to a linear income. Linear income stems from trading your time (hours) for money. You get paid for the amount of hours that you work.
Linear income is typically derived from a job. If you don’t put in the time you will not get paid.
Professions that benefit from linear income are employees; self-employed small business owners; sub-contractors; etc.
Residual Income vs. Linear Income
With linear income one typically has to work 20 – 40 years for someone else before they reach a point in their financial portfolio where they can retire. When someone retires from a job they retire on 40% of what they were making.
With residual income one can sell a service (e.g., energy, merchant services, insurance, health care, etc.) one time and reap a reoccurring income.
Residual income earners will continue to get paid long after their initial effort was expended while linear income earners will have to continue to trade hours for money.
Bottomline: One trades hours for money (linear income) while the other gets paid over and over and over again from one initial effort or service (residual income).
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