Definition, Formula and Examples of Residual Income

You may believe that only a few people have financial freedom.

The CEOs, high-earning employees, and people with a wide range of technological skills are all well-known.

The truth is that anyone can build wealth and make life choices.

How? You can create a steady stream of residual income.

Contrary to popular belief your income doesn’t determine how wealthy you are.

Wealth is not about your ability to provide for yourself if you lose your main income.

Earning residual income is a way to build wealth and financial independence.

Are you not familiar with this income source? You don’t have to be. We’ll explain everything you need about residual income in this post.

Continue reading to find out what residual income is and how it differs to other incomes. Also, learn how to earn it to build real wealth.

Google will return dozens of interpretations for “residual Income meaning”, with some suggesting that residual income could be the same as passive income. This is partially true. People often refer to “residual income”, and “passive income” because they can make a passive income while still making a profit.

Let’s say Tom, a blogger decides to make passive income. He inserts affiliate links into some of his posts to achieve this goal. Passive income is generated when visitors to his blog click those links. To calculate his residual income, he subtracts the commission Tom pays his affiliate partner as well as the taxes he charges on his affiliate earnings.

The principal idea behind residual income is to cover the expenses involved in creating passive streamsspan type=”font-weight 400 ;”>.

Types Of Residual Income

In different contexts, residual income may have different meanings. Let’s take a look at some common uses of residual income.

Corporate Finance

In the world of corporate finance, residual income is how you calculate profit.

It can be used to determine a company’s net value by subtracting the opportunity costs capital from the annual operating profits.

To determine the equity value of a company, you can use residual earnings to calculate the instinct value of its shares.

To do this, the company will be assessed based on its current book value and its future expected residuals.

This can be done by subtracting net income from net capital costs. After adjusting for equity costs, the net profit will be the result.

Personal Finance

To determine your creditworthiness, you can also use residual income.

This income is often used by banks and other institutions to determine if an individual has enough money to pay his bills and secure a loan.

If you have a large amount of cash left after paying your monthly bills and paying your debts, you can show your financial standing to be approved for a loan.

Online business

After you have set up an online companyspan styling=”font-weight 400 ;”>,, your residual income is the amount you make after all the hard work.

You might, for example, open a Shopify shop to sell lucrative items. It will take some time and investment to get the business started. These items will be subtracted from your monthly revenue to generate your residual income.

It is usually very easy to keep the income flowing after initial efforts have been made. In the context of an online business, residual income can also be referred to passive income.

Making Residual Income

A residual income stream can make a huge difference in your life.

Consider opportunities to make a recurring income, whether you are in college or already working.

These are some residual income streams that can help you get started:

1. Dropshipping is a great way to start a business

An dropshipping store allows customers to shop online for different products.

A customer orders an item and the order is sent to a third party supplier, who then ships it directly to the customer.

This eliminates the need to store inventory and figure out how to get the item to your customer.

Dropshipping can be a great way to make residual income.

Suppliers will handle the majority of your business, i.e. You will be able to focus on product fulfillment and less on customer service.

Create an online store using Shopifyspan styling=”font-weight 400 ;”>. Install the Automizely app to find dropshipping suppliers.

2. Start a subscription company

While this residual income business is not for everyone, it can be done well and the money will grow.

You can sell everything from clothing to shaving products through subscription business

You can also hire a fulfillment company to package your products and deliver subscription boxes.

Companies such as Cratejoy can handle onboarding new customers.

3. Let your property be rented

Remote work is a popular trend that may mean you are not using your apartment or home as often as you would like.

Don’t let it sit idle. Create a residual income stream by listing it on Or another similar platform.

You can even rent a spare bedroom to generate discretionary income, even if you don’t want to rent the entire house upfront.

This strategy can be very successful if you keep your tenants happy.

Too many landlords fall prey to the negative stereotype of being greedy and neglecting issues and concerns, as well as ignoring expectations for amenities.

You can be the landlord everyone loves (and refers to), so make sure you check in with your tenants every day and resolve any issues as soon as possible.

4. Crowdfund real property

Real estate crowdfunding is based on small investments by many people to buy property or finance real estate development.

Sign up to become an investor and earn easy residual income. Sites such as RealCrowd and Fundrise allow investors to pitch at various investment levels.

Once your investment has been processed, you will become an equity shareholder of a real estate venture. You can then start receiving passive dividend payments.

Property appreciation may be a way to reap the benefits of property appreciation. Dividend earnings rise when assets are valued more.

Sign up on a few crowdfunding sites to get started. You should have access to at least four to eight property deals per month. This will allow you to make informed decisions about your investments.

5. Make an app

If your technical skills are strong, creating an app could be a great way for you to make some extra income.

You can create an expense tracking app or news app , a to-do app , or a recipe app depending on what you need.

You might also have an idea for a game app like PUBG. This could be your key to a huge fortune.

Hire developers and coders at Upwork or PeoplePerHour if you don’t know much about programming but have an idea for an app.

After you have hired someone to build your app, you can make residual income by advertising, paid access and add-ons that users purchase to make it more fun.

6. Publishing a book

This is a great way to generate residual income.

You can choose to publish your book through a traditional publisher, or self publishing using print-on-demand services

Earnings from royalties and sales will continue to rise, with the possibility of making thousands if the book is a success.

This is the best way to get started.

This means that you should consider your passions and skills when creating a title for the book.

It is also worth evaluating if the information that you plan to share in five to ten years’ time will still be relevant. This will ensure that your book is still being purchased.

7. Photos for sale

Do you have a good eye for photography? Are you a photographer who enjoys taking candid photos of people in public spaces? You might consider selling your work online at sites like Shutterstock or Getty Images.

Stock images are used on a lot of websites every day for blog posts and social media. Their owners are happy to pay for their use.

Why not make a profit from your images collection? With minimal effort, you can license a collection of photos and then sell them again and again.

The platform that you sell your images on manages all the logistics.

8. Etsy allows you to sell digital products

Etsy offers an Instant Download page that allows you to sell digital products. These items are delivered electronically and not physically.

You have the option to sell everything from graduation or anniversary cards to wall prints, inspirational texts, and digital copies of your art.

This has the obvious advantage that you can make multiple copies of the digital file once you have created it. You can also list it on the platform to sell it.

Selling digital products requires less overhead because you don’t have to ship or pack anything.

9. Create an Instagram following

This requires some work upfront. However, once you have a loyal fan base, it becomes simple to make residual income.

Start by creating an Instagram account and then start writing content in a particular niche. To get your posts seen by a wider audience, you can use Instagram hashtags.

Although you might not be able gain the same following as top Instagram stars, it is possible to make a lot of money by running an Instagram account that is smaller and focuses on a specific niche.

Because they are likely targeting the same audience, businesses in your niche will find them valuable. If they choose to sponsor you content, that could lead to a good-sized payout.

Earn residual income today

While everyone loves the idea of having additional income, not everyone can create it. It could be because you don’t have the right strategy or are not receiving honest advice.

These residual income ideas will allow you to make more income, and often passively.

These methods can be easily integrated into your current job. You can build wealth with your 9-to-5 job, or any other primary income source.

Which are your top ways to generate residual income? Comment below to let us know your favorite ways to make residual income.

FAQ

What’s the difference between corporate and personal residual income?

Individuals can earn personal residual income from passive income sources such as stock dividends or rental income. After deducting all expenses and including equity capital, corporate residual income is the income that businesses make from ongoing operations.

What’s the difference between passive and residual income?

Google will return dozens of interpretations for “residual Income meaning”, with some suggesting that residual income could be the same as passive income. This is partially true. People often refer to “residual income”, and “passive income”, because they can make a passive income while still making a profit.

Let’s say Tom, a blogger decides to make passive income. He inserts affiliate links into some of his posts to achieve this goal. Passive income is generated when visitors to his blog click those links. To calculate his residual income, he subtracts the commission Tom pays his affiliate partner as well as the taxes he charges on his overall affiliate earnings.

The principal idea behind residual income is to cover the expenses involved in creating passive streams span style=”font weight: 400 ;”>.

Is it possible to have negative residual income?

Yes, residual income may be negative. When expenses incurred to generate income from an investment or business exceed income generated, this is called residual income. This is when the residual income is negative and indicates a loss in the investment or business operation.

However, residual income can be positive if the income generated is greater than the expenses. Positive residual income is a sign of profitability. It can be used to invest in the business, pay off any debts, or invest in income-generating opportunities.

Do you want to learn more?

• 
  How To Manage Your Personal Finances (And Minimize Worries About Money)
  
• 
  4 Uncommon Methods Solopreneurs Can Save Time
  
• 
  The Story of Ecom King
  
• 
  U.S. U.S.
  
• 
  Are you in need of money? These are 5 online businesses you can start
  

Author: Adeel Qayum