Linear vs. Residual Income

When planning for retirement or even life in general, one most take their income into consideration when trying to calculate how much money it will take to accomplish their financial goals. When doing this, an individual must understand the difference between linear and residual income.

The simple definition of linear income is trading time for money; working so many hours out of the day for a given amount of pay. However, the problem with linear income is that there are only 24 hours in a given day and only so many days in a lifetime. So if one does the math and projects out their linear income out to their desired retirement age and then factor in how much money is needed to achieve their financial goals, 99% of all people will find they come up short; that is unless the individual has a yearly linear income of 6+ figures (which most people do not). Now a decision must be made: either lower your financial goals or find another way to create income to reach those goals – enter residual income.

Residual income is income that continues to be paid on a continual and regular basis for one single investment of money or time. Residual income can be earned in many different ways, but all experts agree, creating multiple streams of reoccurring income (residual income) is the key to creating sustainable wealth.

If one can create true residual income, they will not only be able to reach all their financial goals, but they can have the time now to actually enjoy them with their families.

“Success through Diversification” ~ MiKon Group, LLC.