What is Secondary Income?

Posted:Abigail Andrews – Saturday, May 26th, 2007

"I don't get paid enough!"

I bet we all hear that from our friends and family at least once a week, you probably say it regularly yourself. The problem usually lies in the fact that either:

• you don't like the job you are doing, so even if there is overtime to be taken, the thought of staying over at work even a second longer, gets you running for the door quicker than a "dog outta the traps!", or,

• you struggle to get overtime in your current job, if there is any it's hit and miss, and you need a more secure source of funds than that

That illusive pay rise!

Instead of waiting for that pay rise that never comes, or searching for that new job which means you get paid more but you work longer and harder for the money you earn, why don't you consider other, perhaps more exciting and challenging ways of creating a secondary income.

The Aim of Secondary Income

The aim of secondary income should be to supplement your current income from your main employment, with as little effort as possible, or if it does require a great deal of effort the overall aim should be to create a good source of 'passive income' in the future.

"Passive income? I don't know what you are talking about?", I hear you say...well, passive income means income that is achieved through actions you took weeks, months, even years ago. Passive income, is income that does not require your direct involvement. Some kinds of passive income you may be familiar with include owning rental property, royalties on an invention or creative work, and network marketing.

If you want to earn more, work less, and have a decent retirement, you're going to have to start creating income streams that do not require your direct involvement. The sooner you start thinking about how you are going to create more passive income, the sooner you can achieve personal and financial freedom.

I am not going to go into the gory details of direct, passive and residual income, as I could write a book on it explaining what it all means, but I will explain them briefly below. If you want to read more detail then a fantastic book has already been written. If you are serious about escaping the rat race then you need to read Rich Dad Poor Dad by Robert Kiyosaki. By the way, I have no affiliation with the author, I just really support his philosophy and encourage anyone to read the book and open their minds to their current and future financial situation!

Types of Passive Income

There are two types of passive income. There is a third type of income that, while technically not passive, is a major strategy for earning more and therefore working less.

Residual Income

Residual income is money you earn time and time again, generated from something you did once. Some examples include:

• Agents who get commission every time a customer renews a policy.
• A Network Marketing Representatives income from direct customers when they reorder a product(s) every month.
• A Physical Instructor who creates a video and sells it still weeks, months, years after it was made.
• An IT Developer who builds a program and sells it over and over again.
• An Author who writes a book and still earns commission from sales some years later.
• A Restaurant owner who employees a manager to run his business for him.

These are just a few examples of ways of generating residual income. It may be recurring income from the same customers, or the sales of a product to new customers. It may require no personal involvement what so ever, or it may require some personal interaction to encourage further sale. Often, it's something that you can delegate to an assistant or an employee.

Anything which requires very little of your time can be classed as residual income, basically the more of your time that is tied up the less time you have to earn other monies. You need to create an income which generates itself or where you can pay others to look after it and still be in profit.

Leveraged Income

Leveraged income leverages the work of other people to create income for you. Some examples of leveraged income include:

• An Author selling a book online through affiliates who promote the product for him.
• A Network Marketer who builds a team and receives commissions on the sales made by people in his team.
• A General Contractor who makes a profit margin on the work done by sub-contractors.
• Franchising your business to others.

Ultimately, the key is that you are making money from other people's labour, rather than primarily your own. Leveraged income may or may not also be residual income. Combining them is even better.

Active Leveraged Income

This is a term I use to describe income that requires your direct participation, but that you can make more money from by having more people involved. This generally involves a one-time event, such as:

• A Seminar or Class
• A Conference or Convention
• Concerts
• "Raves" and other parties

Your earning potential is much higher, even though your direct participation is required, than if someone were just paying you a direct hourly rate.

Generate a Secondary Income NOW!!

The sooner you start finding and applying avenues of passive income the sooner you will retire.

• Can you create a product that people will buy time and time again?
• Can you engage others to sell your product?
• How could you make money off the work of others?
• Can you create something that requires little time to maintain but generates money?

If so, DO IT! The sooner you answer these questions, the sooner you'll have financial and personal freedom.

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