If you're an average worker you may have little or no knowledge of the terms "residual income" and "leverage", but if you're hoping to better your lot in life and create any level of wealth you would be well advised not only to understand these concepts but also understand the incredible power they have to change your life. What is a residual income?
A residual income can be defined as any income that continues to be paid to you long after you have completed some form of work or activity. Examples of a residual income might be if you own a rental property, develop software, record a song, or perhaps sell memberships for a business that pays you an ongoing commission for sales. What is leverage?
While leverage is different to a residual income it quite often accompanies some residual income activities and in such cases your earning potential can be boosted dramatically. Leverage is basically doing more in the same time, or doing more with the same resource and is often described by the catchphrase "work smarter not harder". An example of leverage is if you own a business and have a number of employees. The work output of your employees is far greater than you could achieve alone given the same time frame. Think about the reason why Bill Gates is so wealthy. You may initially think it's because he owns Microsoft and it is a very big and profitable company, however this is not the real reason why he is so wealthy. The real reason Bill Gates is so wealthy is because he harnesses the power of both leverage and residual income to maximize his time and earning potential. Firstly he produces software which after the initial development work he receives a residual income from that work over and over again. As well as the residual income from this software he gets massive leverage because he has a large workforce doing the development work for this software. He literally gets thousands of man hours of work done each week. The average person simply cannot get that much work done and this is the true power of adding leverage to any residual income. Benefits
Our discussion of residual income would not be complete without discussing the benefits to your life of having a residual income. While your first thought may be "extra money", that is not necessarily the greatest benefit. The real benefit of having a residual income is that it allows you to take back control of the most valuable and finite resource that any of us have and that even some very wealthy people wish they could control. That resource is your "Time". No matter how wealthy you may be if you "have to" spend long hours at work either for someone else or even in your own business then you do not control your time or the things that you want to do in life. If you're an average worker then your boss controls when you start work each day, when you go home, when you have holidays, how much time you spend with your loved ones and many other aspects of your life. Another difficulty that many average working class people have when considering a residual income opportunity is the general belief that you must get a job and work for someone else. This idea is often deeply ingrained in our subconscious minds and it can often take quite a while to accept the idea that it is possible to create a residual income that flows in month after month on autopilot instead of trading your precious time for a few dollars in a day-to-day job. Also, if you are of the belief that you will work hard in your day job now and enjoy your retirement later then consider these points: - Statistics show that by retirement age 95% of people will either be dead or not have enough money or assets to provide even their basic living expenses.
- If it's a struggle for you to pay for an annual holiday now then how will you afford to see your dream destinations once you retire?
- Considering you will be around 60-70 years of age when you retire do you think that your health and mobility will allow you to do the things you want even if you can afford them?
Once you have come to realize that a residual income is one of the only ways in which to take back control of your life and get the things you want, you then need to find a residual income opportunity that is achievable for you given your current time and financial resources. Some methods such as conventional real estate investment and stock market investment require a large initial outlay and also come with a degree of risk associated with that investment capital, which can often put these types of residual income vehicle out of the reach of the average worker. The most important aspects of any residual income opportunity is that it doesn't require a large time investment (you're not looking for a second job), doesn't require you to invest more than you can comfortably afford and thus has a low risk, and has the capability to grow in some way using leverage to increase your income over time to a point where it can replace your current income and will continue to flow in without you having to work every day. Once you come to understand the true power of residual income and leverage to a point where you believe that you can use them to give you back your precious time then you have taken the first steps to a life that most people can only dream about. Being able to do the things you want, when you want and while you're still young enough to enjoy them are the amazing rewards awaiting you once you learn how to use the amazing power of a residual income and leverage. Copyright 2006
Colin L Wolfenden |
