Residual Income is income that is generated continuously, though the effort to earn it has ceased. It is also referred to as passive income. The more easily understood and self-explanatory term, recurring income is also used.
To elucidate, let us take up the example of a writer who has finished writing a novel. She has sent out copies of it to different publishers, and to her joy, her writing is accepted by a reputed publishing house. She has a copyright over her work, but she can grant a license to the publication to print copies of it and to distribute them. The company will pay her a percentage of whatever they earn through the sale of her book. So, the creativity and hard work she initially put in are rewarded in the form of income that she no longer has to spend her energy to earn.
Now that we have an answer to the question "what is residual income?", we can explore how it is helpful. The amount you earn is usually dependent on the number of hours you work for. You would remember learning about 'direct proportionality' as a child. However, this is not the case with residual income. Once you do hit upon a source of making residual income, it will work on its own to generate a flow of money. There are many advantages to this:
Instead of spending half your waking hours (or maybe even more) on routine work, you can be at ease knowing that finances will find their way to you. This does not, of course, mean that you should fold your arms and sit back, but this gives you time to devote to other interests, hobbies, passions and also allows you to think of other schemes that will result in residual income. This is, again, easy to understand with the example of the writer. If her book is received well by the audience, she will be assured of receiving money from the publishers, and can concentrate on writing an exciting sequel to her book. She is also not bound by monetary concerns that were always at the back of her mind earlier and can sign up for the painting classes she had always longed to be part of!
However, not everyone may be as spectacularly successful as our friend the writer. It may be that one has to continue with a regular job, as the amount of residual income they receive is not too great. This, however, is still not without its benefits, for the purpose of residual income is not only to provide a luxurious life, free of cares. In the unfortunate event of a person losing their job (this is all too common these days) or not being able to attend to their job because of sickness, residual income can prove to be a blessing, keeping their financial situation sound by acting as a substitute to regular income in times of crisis or need.
Obviously, neither a great surge in finances, nor a crisis is required to see the uses of such income. A creative use of residual income is charity. Those of a philanthropic bend of mind will also derive happiness from recurring income, having more to share with others.
Now we can address the issue of discovering a vehicle that can generate residual income. We have already seen that royalties from books and writing are a source. The same applies for all that is copyrightable, such as music that you compose, lyrics that you write, computer code etc. and to patents in your name. However, these aren't alternatives that all of us can turn to, as they almost always necessarily require some talents and skills.
The following are more easily implemented:
If you own any property, you can rent it out and will receive an income as long as you allow others to enjoy it.
If you maintain a blog or website, you can choose to place advertisements on it for which you will be paid according to the contract between you and the advertising company.
You can also invest in stocks and bonds, on which interest and dividends will be paid.
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