It was a true light bulb moment in my life and career when I realized there was more than just one source of income. In essence, there was more than a paycheck! You may be saying…I know that…so then the question is…are you using them! So…let’s take a moment and really look at the streams of income, who uses them and maybe explore how you can utilize them too.
Direct income is the one we are all most aware of. Whether it is in the form of a salary, hourly wage, billable hour or a commission, these are all one time shots at income. For salary or hourly employees, you are trading your time for an income. You are expected to provide your employer a service during those hours but, in most cases, you are probably not providing the service for the full hour…if we are all honest here, you may be truly working 30 minutes out of that hour and filling the rest of the time with activity that looks like work. However, when you get paid (and taxed), you have given away hours of your life that can not be gained back. To make more money, you must give up more time.
If you work for commission only (a direct income stream), you will put in a lot of effort and relationship building for a large pay out. Realtors, financial advisors, mortgage officers and insurance agents are familiar with this line of pay. You don’t get paid until the transaction is complete. There is an investment of time prior but the pay-out is usually in the form of several thousands of dollars and you have the option of closing multiple deals in a month….a virtual windfall. However, realtors, financial advisors, insurance agents and mortgage officers also only receive a percentage of commission and most pay a percentage to a broker, lead officer or brokerage firm. These individuals also receive tax benefits but….to make more money, you have to have multiple deals in the works. Dry spells can be difficult.
Passive income comes as a result of receiving income from people doing the work and you being the support system for them. Partners in firms such as lawyers, doctors or CPAs….Brokers in real estate or mortgage lending…and Network Marketers in direct sales organizations all provide oversight, coaching and support to a team of independent contractors or business “owners”. Due to this partnership, the partner, broker or team lead receives a percentage of others sales or service fee without doing the actual work. This income is also usually limited to the primary sale or service. Their role is completely supportive but has little direct effect on the independent contractor doing their work. And, the income is only in proportion to how much the independent contractor works. In most instances, the partner, broker or team lead is not a boss or supervisor and they have little to no control over how much work i.e. income the independent contractor can create. In this system, the more independent contractors the partner supports…the more income potential.
Residual income is usually considered dividends or interest from investments. However, there are other ways to create residual income. Residual income is income that happens after the initial sale or billable hour. Some forms of residual income have a time limit. For instance, insurance agents and financial advisors may continue to receive commission for several cycles of policies or renewals. People with rental properties will receive rents until the rental agreement is over. However, there are ways to have residual income long term. Network marketers continue to receive income from customer reorders both from their personal businesses and their team’s businesses. In these cases, the original sale has already transacted but the customer continues to reorder products on their own. However, not all network marketing companies operate with a reorder-able product. Supplements, skin care and nutritional products are consumable and create a residual reorder business. This reordering business continues whether the original business owner stays in business or decides to close their business. The additional value of network marketing residual income is it allows for home based business deductions. In most case, this is an asset to the employee as well as the billable/commission based earners. Lowering your tax base keeps more money in your pocket for your family.
If you are looking for extra streams of income, consider how to best utilize your current income stream(s).
Despite what you may believe, you may be able to increase your income with little extra time commitment or better utilizing your current situation. I believe you will agree with me that you can find a way to better utilize 5-8 hours of your week…especially if it creates more income in the same time frame.
And if you need some ideas…make sure you download my FREE Savvy Business Woman’s Guide to Passive Income.
Need some help…training…support to make it happen. Well, darlin’…that is what I do!