The phrase “earning extra bucks on the side” has come to be associated with passive income opportunities.
However, there are other ways to supplement your main paycheck besides engaging in passive income-generating activities. One such method is pursuing residual income ventures.
Read below for a definitive guide to residual income. We’ll begin by defining this type of income and then compare it with passive income before narrowing it down to the top ten residual income investments worth exploring.
Introducing Residual Income
Residual income refers to a type of income that continues to flow in after investing time and resources. Most residual income ventures require almost no involvement from the investor.
Due to its hands-off approach, residual income is one of the most reliable ways on how to make money online as a teen. Teenage kids can engage in these ventures while pursuing their education concurrently.
Another great thing about residual income is multiple opportunities to explore. You can choose an investment instrument that fits your profession or passion. For instance, an artist may consider music royalties, while a real estate mogul would prefer vacation rentals.
Other Definitions of Residual Income
The primary residual income definition relates to the type of income that flows in after making an initial investment. However, the term may have entirely different connotations depending on the context in which it’s applied.
For instance, in personal finance, residual income refers to the total amount left after meeting your debts and obligations. The term is also known as discretionary income.
Let’s say your monthly salary is $5,000, and your total personal debts and obligations come to $4,000. Using the residual income formula, your monthly discretionary income would be $5,000 – $4,000 = $1,000.
Residual income can be an invaluable budgeting and expense tool for personal finance. It lets you understand your financial position after every month. You can then determine much of the discretionary income to commit to savings and investments.
Residual income is also a common concept within corporate circles. It refers to a company’s total income after paying all the necessary capital costs. Many corporate entities use the concept to calculate their financial performance over specific periods.
Difference between Residual Income and Passive Income
Residual income and passive income share certain things in common. Both are great avenues to explore if you’re looking for ways on how to make money online for beginners. The fundamental difference between the two income streams lies in the ongoing effort required to sustain each income stream.
Passive income requires no constant active involvement. This income typically comes from stock investments, rental properties, and interest-bearing accounts.
Residual Income Opportunities
Royalties are unarguably the purest form of residual income. That’s because nearly all the work is completed upfront. There’s almost no active involvement once income starts to stream in.
Royalties come in many forms. The most common ones include;
- Music Royalties
Many successful musicians attribute their fame and fortune mainly to music royalties. But how does it work?
Well, you’ll begin by creating a piece of music. It could be a song, ringtone, sound effect, or lyrics.
The next step is to upload your work on a suitable music licensing platform. Then, sit back and earn whenever someone downloads a digital copy of your music.
Besides earning from downloads, you could also pitch your songs to radio stations and get paid whenever your music plays on air. Some music licensing types even let you earn whenever someone plays or performs your songs, whether at a physical or virtual event.
- Book Royalties
Not only is writing a book one of the most fulfilling experiences. It also provides an excellent residual income opportunity.
Note that a lot of initial effort may be required to get pen to paper. But if you have a passion for writing and are looking for legit ways on how to make money in one hour, then this is certainly an opportunity you want to grab.
After publishing your book, you may sell it on your website or through an affiliate arrangement with other platforms.
For hardcover books, you’ll receive royalties from the publisher for the sale of each copy.
2. Real Estate Investment
Owning a real estate property is both a passive and residual income business. That’s because you’re entitled to monthly rental income with minimal ongoing effort.
Admittedly, residual income real estate investments tend to be capital-intensive. But with the numerous mortgage and home loan lenders, becoming a proud property owner is easier than ever.
Remember to choose carefully between buying a pre-built property and constructing one from scratch. Also, be up to date on all applicable taxes.
3. Vacation Rentals
Airbnb is a lucrative business. The industry will continue to thrive if traditional lodge facilities impose exorbitant charges while providing less-than-personal experiences.
If you have a spare room in your residential property, you may consider renting it out for a fee.
All you need is to take amazing photos of your home and post them on reputable vacation rental websites. Then, wait for the websites to match you with tourists seeking accommodation facilities in your location.
4. Stock Trading
Investing in the stock market is another lucrative way to pursue a residual income online.
First, there are dozens of stocks to invest in. Just remember to study the market carefully to pick the right stocks.
An alternative way to invest in residual income stocks would be through reputable stockbrokers. Their knowledge of market dynamics can be instrumental in helping you choose the best-performing stocks and determine when to trade.
5. High-Yield Savings Accounts (HYSAs)
Many financial experts discourage simply stashing your money in a regular checking account.
Besides the fact that these accounts don’t pay interest. Most of them also attract monthly maintenance fees. Transferring your money to a high-yield savings account is a better option.
As with any passive residual income stream on this list, HYSAs require no effort after the initial investment. Interest rates depend on the amount invested and contract duration.
6. Network Marketing
Network marketing, multi-level marketing (MLM), or pyramid selling may be controversial. But it remains one of the most lucrative residual income opportunities.
Residual income network marketing involves building a strong network of friends and family members. You then leverage these connections to promote certain products.
The initial investment in MLM entails building your private networks involving person-to-person selling. You split the profits with your networks for each product sold.
7. Amazon Affiliate Marketing
There are numerous ways how to make money on Amazon. One such method is by becoming an affiliate.
The fact that Amazon is the largest online retailer makes it one of the most lucrative residual income affiliate programs.
The primary step in becoming an Amazon affiliate is joining the Amazon Associates program. With this program, you earn a commission for every successful product sold through unique affiliate links shared on your blogs, websites, and social media platforms.
Dropshipping is one of the easiest residual income opportunities to set up. That’s because the business model doesn’t require you to maintain actual inventory. The products featured in your e-commerce store belong to a third-party entity, typically a manufacturer, distributor, or other retailer.
When a buyer orders your products, you relay their information to the inventory owner, who ships the ordered goods using your shipping information.
However, while dropshipping can guarantee recurring income, it’s not entirely hands-off. There’s some ongoing effort required in stocking up your store and tracking orders.
Blogging shares one fundamental thing in common with dropshipping and affiliate marketing. There’s some ongoing effort, albeit minimal, required to benefit from these residual income streams.
In the case of blogging, you’ll need to post fresh content every few days to keep your blog active.
But depending on the monthly traffic to your blog and the revenue you’re already generating from monetized posts, you could employ content creators and editors. Your role would be simply tracking your earnings and doing little administrative work.
10. Engaging In Mundane Tasks
Did you know that there are websites that pay you for engaging in everyday activities? Among the secret websites to make money include survey platforms like InboxDollars and Survey Junkie.
There are also websites like BestMark and IntelliShop, which pay you for mystery shopping. Mystery shopping is a research technique in which companies pay people to shop at certain outlets. The goal is to gather information on the outlet’s customer service.
Other websites pay you for playing video games, test-driving new applications, etc.
All the above residual income opportunities can go a long way in putting extra bucks in your bank account. However, in-depth research is necessary before choosing the most suitable residual income venture for you.
As you shall find, certain investments are more capital-intensive, while others may take longer to recoup your return on investment (ROI).
You could also use a residual income calculator to determine the expected earnings from a residual investment before taking up the venture.