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what is a residual income stream?  RSS feed

 
paul wheaton
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I wish to be clear. A residual income stream is a small amount of income that keeps coming year after year for the next five to fifty years.

In other words, you do something now, and with ZERO further effort, the funds keep coming. If you go out into the middle of the ocean for three years, you come back and your bank account is bigger. THAT is a residual income stream.

If you have to do ANYTHING each month, or each year, then that is NOT a residual income stream.

When I get into discussions with people about residual income streams, they seem to say "I'm going to raise rabbits!" and then they talk about meat and pelts and stuff. That is not a residual income stream. If you leave the rabbits and do nothing at all, your bank account does not get bigger. You have to care for the rabbits, harvest the rabbits and sell the rabbits. I would classify raising rabbits as a cottage industry. And when we talk about permaculture, it would part of a collection of diverse income streams, but it would not be a residual income stream.

Putting physical items out at amazon is NOT a residual income stream. You have to keep sending stuff there. If you stop sending stuff, the income stops.

An example of a residual income stream is my ants and aphids article. I wrote it in two hours in 2002 or so. There is an adsense banner at the top and one at the bottom. The article brought in about $3 the first month. It went up and up for a few months. And then down. Averaging about $5 per month for all time. So about $60 per year for 13 years ... $780 so far. Eventually it will be more than $1000. So, about $500 per hour? The important thing to point out here is that since 2002, I have not edited it. I think there is one pic in there that somebody gave to me - I think I added that. So, maybe fifteen more minutes. I think when I changed some stuff, I tried to make sure there was still a link to it. But I could have left out those things and it really wouldn't have changed anything. The key is adsense continued to put money in my bank account every month and I did nothing else. I could have passed "the ocean test" - sitting in the middle of the ocean for three years and returned to find I had more money in my account.

I hope I have made it clear on what a residual income stream is. Now I want to direct your attention to why you should care.

What if you fiddle with residual income streams for two hours per month? And after a couple years of fiddling at this rate ... in your spare time ... and only focused on cool permaculture stuff or whatever you think is fun .... you find that you now have $200 per month coming in.

There are some brutally important points to this:

601: If you have no debt, you can live comfortably in some parts of the world. You could retire.

602: If you spent two hours a day instead of "a few hours per month" you would now have something closer to $4000 per month now.

603: so many of the "smart money" books say "go get a million dollars, invest it wisely, and then retire." But the step that always trips me is "invest it wisely" which sounds a lot like "gamble wisely" or "when you play poker, bet big and make sure you are dealt a good hand." Plus, I think for most people, going out and getting a million dollars might have its own challenges. Therefore, the point of this point is: I think that this path is smarter than all those "smart money" books.

604: I like to think that somebody that is 16 years old can do this and retire at the age of 18. It is entirely possible. In fact, it is easy. In fact, I have heard of teeny boppers that have done this.

605: Whenever I hear of anybody suffering from their expenses being the same as their income, I just think about how easy it is to give this gift to your future self. Nearly all of these people are working a 40 hour a week job. So they are away another 72 hours per week. Imagine if they spent 10 hours per week for a year or two fiddling about with stuff they think is cool. Then there would be a day that they would have double the income. Of course, it would be their choice if they were still spending as much as they earned.

606: When your monthly income exceeds your monthly expenses, you are free. Well, free-er. Your days can be spent doing all sorts of things that you think are cool.

607: There is a difference between doing a few hours of work per month and never doing anything. Some people seem to think that if they spend a few hours per month wishing for money that it will just appear. Further, this is not a job. This is about doing stuff that you think is cool and it just turns out to create a tiny trickle of income. But all those tiny trickles add up.

608: You can go work a job that earns $20 per hour and at the end of an eight hour day you have earned $160. To get to work, you probably had to have a car and be dressed and groomed a particular way, and you had to be there at a rather exact time. And you don't get paid for that commute. While you are there ... well, some people have lovelier jobs than others. If you spent those same eight hours on residual income streams, like what I did with my two hours of article, you could end up with something like $500 per hour (although it is paid out over decades).




I got to the point where my residual income streams grew to be bigger than my monthly expenses. Money started to build up in the bank. I started to think about buying land and make all my permaculture dreams come true.

I traveled around to workshops and got to meet fascinating and amazing people. I learned so much so fast. I took a lot of this and wrote about it or made videos and my residual income streams got bigger.

Some of my residual income streams shrunk and a few grew to pretty big.


I want this thread to focus on the definition of a residual income stream.
 
Matu Collins
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One example of a residual income stream is an article with ads on the internet. Some musicians have songs up on sites like pandora which have tiny residual income streams. What are done other examples of residual income streams. When you say fiddling around with cool stuff, I can't quite picture it. YouTube channel maybe? I wouldn't knew where to begin.

I do like to write and I fiddle with cool stuff that lots of people would be interested in, I think. But where does a regular analog person begin?
 
paul wheaton
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Matu Collins wrote:One example of a residual income stream is an article with ads on the internet. Some musicians have songs up on sites like pandora which have tiny residual income streams. What are done other examples of residual income streams. When you say fiddling around with cool stuff, I can't quite picture it. YouTube channel maybe? I wouldn't knew where to begin.

I do like to write and I fiddle with cool stuff that lots of people would be interested in, I think. But where does a regular analog person begin?


I think the first thing to do is look at the big list of residual income stream stuff.

And then for each idea where you would like to get started (music?) then start a new thread.
 
Roxanne Sterling-Falkenstein
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Read all kinds of great books aloud . if you have a fantastic reading voice. and post on youtube or scubbly? .
I just read your a big list of REAL residual income streams .. got to #833 and thought 'I could read any book!'
still musing thank you for the inspiration.
 
Hans Quistorff
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Here is an example I am reading tonight.
The Mud Home
Check out how close to Paul's philosophy hers has come to be. in this post
Where Did Environmentalism Go Wrong?
May 2014
 
john mcginnis
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Something probably as important as the idea of the residual income is the permi idea of stacking to generate it. Example:

You go to a Permaculture event in Bogotá. Well rather than just the event you :

* Attend the event.
* Record the event (with permission)
* Extend your stay to see the architecture of the region.
* Tour known restaurants and interview the owners.

The products:

* Your permi knowledge base increases.
* Podcast of the event (r)
* Video series of the event (r)
* Coffee Table book of Bogotá architecture. (r)
* Travelogue article on Bogotá. (r)
* Food series article. (r)
* Podcast of the restaurant owners and their shops. (r)
* Small recipe book on the local cuisine. (r) [probably share this stream of income.]

To squeeze all that in requires pre-planning and forethought. Also requires some minor skills as presented. But I know a retired couple that does this with regularity with a different set of interests.
 
Inge Leonora-den Ouden
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I illustrated two children's books. I hope the royalties of those books will be a 'residual income stream' for many years
 
john mcginnis
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Is there a forum post on 'near residual' income streams?

By that I mean:

* There may or may not be a certain level of effort up front. But after that maintenance of the income stream might only be 2-3 hours a week?
* That the effort expended has at least 100% return on your time if not a lot more.
* The income stream leverage’s off a primary income source at its best.
 
Robin Chestnut
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Location: Teulon, Manitoba, Canada, Zone 3 or 2B
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Does anyone have any experience with Derek Halpern's system of creating online courses?
 
john mcginnis
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Robin Chestnut wrote:Does anyone have any experience with Derek Halpern's system of creating online courses?


Don't know about Halpern. But there are several platforms to do online courses:

- Moodle
- OpenEDX

With Moodle you would have to host your own site or work with a partner. I have done this in the past. Coupled with YouTube for video content it can make a pretty powerful tool.

OpenEDX is its own site. You would make a proposal for your offering. Be aware that most of the content is university related in focus.

There are of course several other platforms you could consider. Here is a link to some of them -- http://www.freetech4teachers.com/2011/02/seven-free-platforms-for-teaching.html

Personally I like Moodle as I use it as an instructor. I am familiar with its features which are extensive. But I would have to warn you, the successful online content courses are very much 'hands on'; a far cry from Paul's definition of residual income.
 
paul wheaton
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john mcginnis wrote:
Is there a forum post on 'near residual' income streams?

By that I mean:

* There may or may not be a certain level of effort up front. But after that maintenance of the income stream might only be 2-3 hours a week?
* That the effort expended has at least 100% return on your time if not a lot more.
* The income stream leverage’s off a primary income source at its best.


I made a thread for that: http://www.permies.com/forums/t/52383/ri/list-residual-income-streams
 
Sam Boisseau
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I wrote a long post and then it disappeared. Going to try to summarize.

I think when trying to define this type of income stream, we should ask ourselves "why do we want this kind of income stream?".


From my perspective, the main reason for a permie would be to have income coming in that can fund our permaculture projects/life.

So we need:

- flexibility with our work schedule
- ability to be home most of the time
- have that income enable us to not have a job (or only part time), especially when we need to spend time on permaculture (e.g. during the growing season)
- ability to quit and come back to it anytime


I think there are some things that are not exactly residual income that would qualify for our permie needs.

I would agree with Paul that raising rabbits wouldn't count, because you are commited to those rabbits every day. Therefore you wouldn't be able to go to a RMH workshop without finding someone to replace you. Maybe having someone raise rabbits on your land and giving you a share of profits counts as residual income. Think Joel Salatin stacking businesses.

However, there are possibilities that might stretch the definition of residual income, but still fit our needs:

1) Spend 500 hours building a website, then maintain and update by working 5 to 10 hours a week.

I think this would fit our permie needs, as you could build this over the winter, and then have a lot of free time to work on permaculture while you are only spending a few hours each week maintaining. It would probably be easy to take a month off if you wanted and still get some revenue. If the site is really working out, you could probably take a whole year off and still get some revenue, though most likely only a fraction of the original revenue.

Also, the 5-10 hours you are spending on it could be considered as building new residual income. By adding 10 articles a week to your website, you are technically creating 10 new flows of income.

2) Spend 1000 hours on building a highly valued skill, become a freelancer on your own schedule.

This is a bit stretching the definition of "almost residual income". But in a way, it fits our needs as permaculture enthusiasts.

For example, you could spend the next two winters studying web development and building your reputation. Thereafter, you sell your skills $100/hr. You could spend 3 months each winter freelancing and make all the money you need for the year. Or you could spend 8 hours one day each month working on small projects and make $800/month. In a way, this wouldn't be any different than spending 8 hours each month building new residual incomes. Lots of flexibility, no long term commitment, enough money to not need to get a real full time job.



 
C. Letellier
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Be aware that art, writing, and music are areas where the competition is fierce. Even if you are good enough you may not be discovered in many cases. So be willing to look else where if this isn't working for you.

One of my failures was pen and ink art. The unasked for consensus was that I should be selling it. I had done it simply for fun. While I was keeping up with my mother in hospitals all over it probably kept me sane. I could start and stop it easily. And it demanded just enough attention to keep mind occupied. So because 30 or 40 people who saw it the majority said I should be selling I listed it on an art print web site. It has been there 2 years and has never sold a single thing. The catch is that they get in something like a million new pieces of art a year. It is very easy to get lost in the crowd. And it is also possible I am not good enough. I am also a niche market not main stream.

low res sample below.

My point is not to discourage but simply to say if something doesn't work TRY SOMETHING else.



art22.jpg
[Thumbnail for art22.jpg]
 
Tyler Ludens
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C. Letellier wrote: So because 30 or 40 people who saw it the majority said I should be selling I listed it on an art print web site.



Unfortunately I have learned that the minority of people who say I should sell my artwork actually want to purchase any of it and that lots of positive feedback about one's work does not necessarily equal lots of sales. Art/craft is a tough, tough market to survive in and depends more on salesmanship than artistic talent, in my opinion. I'm reasonably talented, but a crappy salesperson, so have never been especially successful beyond earning a basic living from making stuff (my only job).
 
C. Letellier
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Tyler Ludens wrote:
C. Letellier wrote: So because 30 or 40 people who saw it the majority said I should be selling I listed it on an art print web site.



Unfortunately I have learned that the minority of people who say I should sell my artwork actually want to purchase any of it and that lots of positive feedback about one's work does not necessarily equal lots of sales. Art/craft is a tough, tough market to survive in and depends more on salesmanship than artistic talent, in my opinion. I'm reasonably talented, but a crappy salesperson, so have never been especially successful beyond earning a basic living from making stuff (my only job).


I agree. That is what I quickly learned applied to art. And I watched my mother go through it with writing stuff. Her cooking with cream cookbook she didn't manage to sell to a mass market so she self published and over the course of 20-25 years it ran 3 printings for a total of 3500 books. But to make that work she worked at it. Often times sales at an activity barely paid the gas to go. It certainly wasn't a residual income stream. There were always a few orders that appeared out of no where every year but mostly it took salesmanship. I watched all of her struggles there and all of the writers groups she was involved in so I know there are way more would be writers than there is market for and I am seeing the same thing in art and in music. It isn't that they can't make money. It is simply that they are unlikely to produce a residual income stream. If they are making money it is because of that continued salesmanship and lots of work beyond producing the work itself.

 
Tyler Ludens
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C. Letellier wrote:lots of work beyond producing the work itself.



Absolutely, and so if your work requires a great deal of time to produce, you must be a bundle of energy in order to have sufficient personal resources to sell the work after producing it. And of course for it to be considered at all "residual" the work must be a reproduction, not an original.

 
Milja Hahto
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When I look at the ideas for residual income streams, think of my skills, and then energy levels, it would take quite some time before I got the residual running. Unless I get a fortune to invest, but probably even some 10 000 € would be better spent on paying a part of our mortgage, making monthly expenses smaller.
 
Jason Hernandez
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john mcginnis wrote:
Is there a forum post on 'near residual' income streams?

By that I mean:

* There may or may not be a certain level of effort up front. But after that maintenance of the income stream might only be 2-3 hours a week?
* That the effort expended has at least 100% return on your time if not a lot more.
* The income stream leverage’s off a primary income source at its best.


Tim Ferriss wrote The Four-Hour Work Week about doing just this. At first glance, it seemed vague as to practical suggestions, but on further thought, that was because each such income stream has to be uniquely individual. He wrote about some of the things he did, with the assumption that everyone else would do different things than he did.
 
Dennis Clover
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that means you must write about something that is so useful that it continues to be useful even after 1 year, 2 years and even 10, 20 years.
difficult i would say.

i mean say i write something about an apple phone.
by next year, it would be outdated
 
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