Residuals are payments rendered after the completion of a service or an offering. A residual is when you write a song and its played somewhere down the line or where you create an art piece and it is licensed to be used on media. Residuals are most common in the entertainment industry and are often thought of as passive income or passive income streams in most literature outside of entertainment.
Do you know what it feels like to do a piece of work and keep getting money for it? It’s one of the greatest feelings in the world because you’re working smarter rather than just harder. Make something of value and let it print the checks for you. When done right, you don’t even have to come back to it, you let it just ship the money your way.
Everyone talks about their side hustle, but each one seems to be more work, just outside of the office. Why not turn some of that motivation into something that keeps giving you a little even when you’re not giving anything? It’s the less sexy reason behind why I write (here’s the nicer reason).
Why Do Residuals Matter Financially?
Have you ever received a royalty check before? I had a share I inherited in an oil well which got me something like $50 a month to do literally nothing. It wasn’t a lot of money, but at the same time, it was free mailbox money. Actually, it wasn’t even mailbox money since I had it direct deposited. It just showed up in my account and I did literally nothing except put a 1099 on my tax return(s).
Trust me, I’m not bragging about receiving beer money. But, the feeling of money for nothing else other than someone’s previous work definitely made me happy. After reading The 4-Hour Workweek I got obsessed with finding similar streams of income which were smaller investments. There’s little more joyous than free, dependable money.
Small issues didn’t matter as much. Each extra stream just means more of a buffer can be built against life, and that more can be painlessly invested in more income streams. Each little hedge buys security and freedom, but let’s see why passive income and residuals really matter.
1. Passive Income Is An Income Stream
All income is good income. Why let a project or an idea be a single payment when it can keep on paying? If you’re in a creative enterprise, this means that a single piece becomes a source of new and continuous money. Why just sell the piece when you can sell rights to use the piece? This is the same principle behind how patents make their money. You don’t just sell the product, you sell the idea behind the product. Doing so, you also have virtually no risk minus the filing cost and the time to come up with it.
A single print might be worth something, but the exclusive rights to print it on all sorts of items which can be commoditized can become worth so much more. You may not see the same initial income, but you keep getting money as someone else does the hard work of printing, marketing, shipping, dealing with customers, etc. The more they succeed, the more you do as well. If the idea is good enough, if they fail, you can repeat somewhere else as long as they don’t burn the bridge.
You offload the risk and the pain of making it all succeed. What’s not to love? I don’t want to sit and write about tech forever, but enough articles which hit their decline curve at $0.10 a day, and I’m still sitting pretty.
2. Breaking the Status Quo
Time is traditionally held as the universal currency to trade for money. What about value though? A plumber can charge $300 an hour to turn a single knob in a wall because they know which knob to turn because of the time and training it took to learn which knob mattered, but many scoff at the fact a person wants to monetize the value of their time rather than the time proper.
If you can produce in 10 hours what someone else produces in 40, why should you be paid the same per hour? Why should you work 40 hours if it doesn’t scale? Tradition is the only reason, and it doesn’t make sense. You probably won’t change the tradition at your current job, but you can if you move outside the traditional box.
When you work off of value, you spend less time but make it more valuable. Who cares about emails you sent when you solve expensive problems? Working for residuals allows you to buy your time back and breaks you out of the rat race long term.
Trade your time into value and extract the value longer term. Turn it into something which keeps paying you so that you disconnect your time with your worth. Anyone can throw time at a problem, but not everyone can solve the problem in the time. Leverage you abilities to do so over the raw, rote time put in. Break free of the time trap.
3. Free Up Your Time For Meaningful Work
“Work” usually conjures up the image of sitting at a desk doing soul-crushing TPS reports for no real reason. I have my job and I have my work. I want to learn, I want to grow, I want to improve the world with my words. All I want is to be more than I was and strive for knowledge and answers while being available to spend time with my family and loved ones. My job is just a way to finance the base package.
Residual income frees you up to make moves you can’t when you’re beholden to a job. Generate income which can help extricate you from the existential dread of 9-5 (or, more likely 8-5 because why should you be paid for lunch after all?). The more passive income you have coming in, the more risks you can take. How can you take a huge cut to start your dream job if you can’t make the bills at the end of the month?
By leveraging your value and turning one-off time expenses into continuous income with little upkeep, you build a safety net. It might not be a lot, but it can be enough to help eat the loss of a massive change or life event. With more safety and more stability, you can move in the right direction for your long term happiness. As I get more minor streams in, I can cut out more side work I don’t enjoy to focus on work which leaves me fulfilled.
Creating Residuals
If you work for a company, you probably won’t be using work to build your passive income up. Most companies want to own every single second of the clock you’ve used your brain to even think about something. In this case, look for something outside of what the company controls. If you work in IT, look at making tools which do not compete (depending on the company, this can even be a huge boon to them to pay you for your tools if you negotiate right), or in art which is unrelated at all.
Find a muse which works for you and one which will motivate and push you towards improving yourself and which can be monetized. You’ll have to make some sacrifices, especially early on, but it can be worth it. My most financially successful article as of writing is Fileless Malware: The Advent of New Generation Malware. I don’t want to write about tech at all, but it keeps bringing in money and I like writing, so I keep doing so.
Most of my articles are about tech for this reason. Each tech article which makes $30 saves me from an hour of discount family friend IT work. I don’t have the time or the will anymore. Each article adds more potential income, helps me hone my craft, and makes me happy even if it’s about computers and technology. The investment of time on something else feeds into my other works in terms of skills and I still get paid.
Finding Your Muse
What are you good at which can be reused? What do you know which is worth money? The people who got richest off the gold rush didn’t pan for gold, they sold picks and pans, or information on prospects. What can you give to prospectors?
Look at the Unity Store or any other asset marketplace. There are all sorts of uses for all sorts of content. If you design websites, why sell the administration when you can offload that on someone else by selling just the designs as templates? The same can be done with image templates. Why design the menu and format everything when you can sell just the template and make someone do the hard work?
It’s easier to get $10 from 100 people than $1,000 from one over time. The 100 have $10 worth of say each while the one has $1,000 worth of say. If a few ditch out from the $10 crowd, you’re out a couple coffees, if the $1,000 ditches out, you’re out a hustle. You lower your risk and your workload by swapping the whale for a bunch of easy fish.
Conclusion
Residuals are important because they buy you a passive income stream which continues to bring in money, this helps you break away from the status quo and buys you freedom to do more, so that you can focus on the work that actually matters to you. Turn your expertise into something you can sell. Focus on the small fish instead of the whale; it’s easier to deal with a bunch of angry fish than a surprise shark if you get something wrong.
Mailbox money is the new dream. Capitalize on what you know and what value you bring instead of how much time you can spend. You can buy freedom and you can buy time. It frees you up to really focus on what you want to do instead of being stuck on a wheel like a rat in a cage.
Featured image by Nadine Doerlé from Pixabay