For most Americans, losing a job means losing their only stream of income. Unless a large reserve fund is available, finances will become very stressful, very fast. Since many Americans don't have a reserve savings account (note: please start one if you haven't already!), the weight of no money coming in will become a quick problem.
This is exactly what happened to several Americans starting in 2008 when our economy tanked. A large number of lay-offs left many families with no cash. As a result, they were unable to pay their mortgage and many foreclosures arose in the Real Estate market.
Lets learn from this lesson. Do you want to be a slave to your job? Or would you rather create additional income streams? Therefore, losing your job would not mean losing your entire income. Now, that sounds like a good plan!
Residual or passive income is defined by Wikipedia as Income received on a regular basis with little effort required to maintain it. Basically, residual income takes some work to get established and may require maintenance, but can create an income stream with minimal effort. There are several ways to gain residual income. Today, I'll start with four:
1. Real Estate - Have you ever read Cashflow Quadrant? If not, you really should! Kiyosaki learns from his "Rich Dad" some very valuable lessons. One that sticks out in my mind is basically this, how many properties can you own where you owe $100/month for the payment? Hmm....not many. How many properties can you afford to own that pay you $100/ month? Hmm....many! The basic point, is that investment property can be an excellent source of residual income, but you need the right property. It will take some work - finding renters, repairs, maintenance, etc. But, it can also create a way to make some money every month. Now is still a good time to buy an income property!
2. Commercials/Film - Acting is an excellent way to earn residual income. On many jobs (usually SAG or AFTRA) you are not only paid for your time, but also the amount of times the commercial or film is aired. The checks will simply arrive in your mailbox, seriously! They can be as low as a few dollars and as high as several thousand. I shot a commercial over 5 years ago that I still receive a residual check from 3-4 times a year. There was also a movie where I booked a role, but the role was dropped right before shooting. Regardless, I was under contract, so I reap the benefit of residuals. I highly suggest an agent if you ever plan to receive residuals from on camera jobs. Agents will also keep track of non-union jobs with a buy-out. If the commercial renews, you will receive a renewal payment. (If you are interested in finding a agent, click here)
3. Licensing - Another book to read is Multiple Streams of Income by Robert Allen. I wrote a review about it here. Anyway, Allen has a great chapter on licensing. There is an example of an American man traveling overseas who came across a funny blue character. He realized the character had not been licensed in the US, so he did and made a FORTUNE on the smurfs!! Basically, if you license a image, logo, program, etc. you are paid every time it's used. By granting the rights to your idea, a royalty fee is granted to you in return. I've never licensed anything, but hope to add it to my residual income portfolio one day.
4. Tax Lien Certificate - According to Tax Forfeited, a tax lien certificate is a lien on a property because the owner has not paid property taxes. If the property taxes are paid by the given time, the tax lien is removed. But, if the tax is not paid during the allotted time, the government will allow investors to pay the property taxes on the owners behalf. What's in it for the investor? Well, for the owner of the tax lien certificate there are two possibilities. First, a return of 5%-36% per year on what the investor paid for the tax lien or through foreclosure the investor becomes the owner of the real estate property free and clear of any lesser liens (tax lien has priority over other liens such as mortgage or mechanic lien).
These are four ways to earn residual income, but there are many more. Feel free to list a few in the comment section! I'll follow up with more residual ideas soon.