Your income can be residual or passive. The latter corresponds to the earnings generated through an investment, which does not require your active role. For instance, the amount gathered from purchasing dividends in a firm can be considered as passive income.
On the other hand, residual income equates to the money, which you have left remaining after all your necessary and basic needs are met. This suggests that the money remaining after paying rent, mortgages, making utility payments, along with the amount spent on groceries, can be constituted as residual income.
A higher residual income suggests that you are able to earn more than you are spending. This means you can spend more on luxuries and opulent experiences. However, having a high residual income can also reflect well on your financial profile. When you apply for a loan, banks and other lending institutions typically calculate your residual income, as they consider it as a factor that deems the reliability of your loan application. If you have a high residual income, you are more likely to repay your loans. As a result, lending agencies give you a high probability of accepting your application and charge a lower rate of interest on your loans.
Therefore, if you have the money, you can easily make active efforts to increase your residual income. If you are unsure of ways to do that, you can take advice from the following guide.
Invest in High Yield Dividend Paying Stocks
High-yield dividend stock allows you the opportunity to earn a regular income, without making much effort throughout the process. Dividend stocks dispense a specific amount of the company’s profits to investors on a regular basis. Depending on the company, you can earn dividends on a quarterly, semi-annual, or annual basis. Essentially, you also have the option to re-invest the dividends, if you feel like the company has good future prospects.
In contrast to the stock market, it is much safer to invest in high-yield dividends, as they generate regular income and assist in diversifying your investment portfolio. However, before taking this initiative, you must carry out a comprehensive research about the profitability of the company that you desire to invest in.
With dividend-paying stocks, your work is minimal. When the dividend amount is received, you have the liberty to either reinvest or use it as additional income. If you invest a bulk of your portfolio in index or ETF funds, you can benefit from the income of other stocks, even if one of the stocks suspends its dividend payments.
However, if you opt for the investment in individual dividend stocks, you would have to invest a lot of time in researching the vulnerability of the stocks. However, this option would provide you with a higher-yield, in contrast to the index and ETF fund options.
Although there are several websites dedicated to identifying promising companies for high-yield dividend investing, it is imperative to carry out your own personal investigation. Additionally, you can use these websites, along with your broker’s webpage, to enumerate your targets, so you can research them further.
Once you have selected the companies, your research should revolve around three factors. You must examine the following areas:
Comparison with the dividends offered by other companies
It is essential to compare the company’s dividend yield with others in the industry. If the company’s dividend yield is extremely high, this could be considered as a warning sign as the company may not be able to sustain the dividend payment for long. Therefore, you must compare and contrast one company with others in a similar industry.
The company’s payout ratio
Studying the firm’s payout ratio is also important. The pay-out ratio tells you about the percentage of income the company dedicates to its dividend payments. If the payment ratio is extremely high (more than 80%), this suggests that the firm dedicates a large share of its profits to making dividend payments. Additionally, if the pay-out ratio increases more than 100% then this would tell you that the enterprise is gradually going in debt, in order to maintain its dividend pay-outs. Considering these numbers, you can make an educated decision about your investments.
In the case that you are investing in individual stocks, you must consider the percentage of your portfolio, which you wish to allocate to each stock. If the stock coincides with an elevated degree of risk, you must invest a limited amount in purchasing them and allocate more of your money towards more secure or safe companies.
Buy Real Estate Investment Trust (REITs)
A Real Estate Investment Trust (REIT) refers to a firm, which has acquired ownership and management responsibilities of property on account of shareholders. By investing in a Real Estate Investment Trust, you can reap the benefits of having ownership of a property, without having to buy and manage it yourself.
When you make this investment, your money is contributed to the amount collected by other investors. Hence, you are not required to place a lot of money, rather you can invest as much as possible, depending on the fund’s minimal requirements. This method is an alternative to investing and benefiting from the buy-to-let property. Essentially, with a REIT, you are empowered to enjoy the numerous advantages of owning a property, such as the growth, income, and capital value of property sales, while excluding the management fees.
Real Estate Investment Trusts proffer a stable surge of income for investors; however, this method has limitations concerning capital appreciation. REITs are typically traded parallel to stocks; hence they are extremely liquid. This characteristic makes REITs quite different from making active investments in real estate.
While REITs are similar to a stock, the properties dealt by this trust are non-residential. Hence, the fund manages real estate, such as offices, apartment buildings, commercial retail outlets, cell towers, data centers, resorts, self-storage facilities, shopping centers warehouses, medical facilities, or hotels. With that said, there are two subdivisions of Real Estate Investment Trusts.
Equity REIT comprises a firm, which has acquired ownership of a different range of properties, including shopping centers, flats, offices, and hotels. These firms generate their income by charging rent on these properties.
Mortgage REITs constitute of firms, which have acquired ownership of both residential and commercial property assets. Hence, they generate their primary income from the interest earned on their investment via mortgages.
Investing in REITs is quite advantageous, as it offers a hands-off approach to generating residual income. Additionally, REITs are required to pay at least 90% of their annual taxable income to their investors.
In order to invest in a REIT, you would need to use a stockbroker or an online broker to help you purchase shares that are listed on the stock exchange. However, the management fee of a stockbroker may be high. Therefore, the most advantageous option would be to formulate an account on a share-dealing online platform, such as AJ Bell or Hargreaves Lansdown, so you can benefit from the comprehensive advice of the stockbroker, while also saving on management fees. These platforms proffer pre-selected investment suggestions and charge relatively reduced charges for management.
Lend to P2P Lending Platforms
Peer-to-Peer lending platforms eliminate the requirement of the banks, or any other lending authority when giving out loans. P2P lending platforms enable you to connect directly with the borrowers, so you can review their individual portfolios to make an educated decision of investing in their company.
With a Peer-to-Peer lending platform, you can lend money to qualified applicants, while abiding by the regulations of the platform. Peer-to-Peer lending websites typically determine the rates, as well as the terms for lending, often after considering the investor’s point of view. Once the regulations are agreed upon, the transaction is permitted.
However, if you are lending through Peer-to-Peer lending platforms, with the intention of increasing your residual income, you must take the following advice into consideration:
Avoid giving loans at a high-interest rate
An increased rate of interest is directly proportional to an increased risk. When you are investing your money to increase your residual income, it is important to play it on the safe side. Peer-to-Peer lending platforms usually categorize borrowed, in accordance with their level of risks. This means high-risk investments are symbolized by a high-interest rate. You must avoid the temptation of choosing risky options.
Thoroughly examine your options
The fundamental rule of making an investment is comprehensive research. If you lack a basic understanding of the P2P platform, along with the borrower’s firm, you might put yourself in a situation where you are more likely to lose money. Hence, it is imperative to educate yourself about the risks, rewards, and the Dos and Don’ts of investments on Peer-to-Peer lending platforms.
Avoid monthly withdrawals
Monthly withdrawals on P2P lending platforms can fail to provide the same amount of benefit, as compared to long-term investments. If you play the long game, you can earn much more, as you are able to benefit from the compounding effect. Considering this, it is recommended to make an investment that extends over a period of three to five years. This way, you can truly benefit from your investment.
Lending on Peer-to-Peer platforms can increase your residual income, in the upcoming years. Therefore, by taking the initiative of lending to a long-term plan, you can earn larger profits in the long run.
Start an online niche blog (Affiliate Marketing)
Affiliate marketing refers to the idea of generating an income, through earning commissions from the promotion of products and services of other brands. Holistically, the idea seems quite simple and expedient. However, the process requires a strategic and prudent approach to ensure that your plan for affiliate marketing is a success.
The most common method of instating the venture of affiliate marketing is starting a blog. Blogs with larger traffics are preferred by companies, as they strive to get their product/ service promoted. Taking this into account, affiliate marketing is only a success when your blog has enormous traffic. Therefore, if you are considering affiliate marketing to increase your residual income, you must take the following guidelines into account.
Pick a niche
The first and foremost initiative that you are required to take, is picking a niche for your blogs. In order to be recognized by companies and firms, your blog needs to stand out and fit the generic image of the brand. For instance, if your niche is healthy and organic food, you should look to promote the products of a company that sells vegan food items.
When it comes to selecting your niche, you must be extremely specific. It is imperative to diversify your brand so that you are targeted by companies that consider you as a good source to represent their products. For example, if you promote a healthy lifestyle on your blogs, you could be reached out by brands that sell teas, organic food items, exercise equipment, skincare products, along with establishments that extend mental health facilitation and stress-management services.
If you are unsure about the type of blog you can start, you can use the following ideas for inspiration.
- Weight loss
- Healthy lifestyle
- Mental health and spirituality
- Reproductive wellbeing
- Digital marketing
- SEO marketing
- Social Media Marketing
- Mobile and PC technology
- Relationships and dating
- Financial advice
- Pet care
- Music Trend (choose a specific genre)
- Makeup and skincare
- Travel guide and adventures
- Life coaching
- Mindfulness and meditation
In order to promote your blog and make it more relevant, you can work with an SEO service provider to boost your search engine ranking. Your spot on the Search Engine Results Page (SERP) can determine the amount of traffic your blog receives. Additionally, the higher you rank, the more visible you become for businesses seeking out promoters. Therefore, investing in SEO can kickstart your affiliate marketing process.
Write helpful and in-demand content
Essentially, your blog’s value would be determined by the influence it has over the followers. Considering this, if you are unable to provide in-depth, helpful, and engaging content, your followers will eventually leave. Therefore, it is crucial to curate content that fascinates the reader and encourages them to revisit your page. With that said, you do not have to write each blog yourself, rather, you can hire freelance professionals’ writers to help embellish your blogs. These individuals can use their skillset to engage the readers, while simultaneously promoting products or services.
Build an App
The mobile application industry has come a long way. In this extensively-digitalized era, there is an application for almost anything. You can use a mobile app to find the cheapest gas station near you, or you can use an app to generate a fake message to liberate yourself from an awkward situation.
Despite the fact that there are millions of applications designed for iOS and Android platforms, there are still needs that are yet to be fulfilled. If you are able to meet these needs, your application can generate an income that could possibly increase your residual income.
However, building an application requires more than just an innovative idea. You would also need to hire a proficient developer, while also investing a large sum of money into the application. Keeping this in mind, it is extremely important that your app idea is valid and in-demand. Once you have decided on the creative idea, you can take the next initiatives of building an application.
The cost of creating an application can vary, depending on the complexity of the app you wish to create. Typically, the price range can vary from £500 to £4,000. However, if you are aiming to build an extremely interactive and complex application, you may have to invest a large amount of £25,000 or more.
Building an application obligates you to work with a professional developer. This individual can code your application and take the initiative of marketing it proficiently on the selected platforms. However, at this stage, your primary duty would be to build an excellent team of trained developers, who can handle all aspects of the job.
Selecting a platform
When building an application, you must select a platform that features the application. For instance, you can design an application for iOS or Android, or you can create an app that works on both platforms. However, the latter option would cost you more.
Determining the price
Once your applications created, you would need to price it meticulously. If your application is too expensive, you might lose the buyer’s interest. However, if you price it too low, you may not recover the development costs, thus reducing the chances of increasing your residual income. With that said, you can enable the app to be downloaded for free. Generate an income by running advertisements and charging for an in-app purchase. In order to determine the right price, you must consult with an industry professional.
Buy an Online Business or E-commerce Store
Money has the power to reproduce, however, that only happens if you invest it carefully. In order to generate residual income, you can consider purchasing an online or E-commerce store. There are several functional stores online, which are up for sale. By acquiring ownership of these stores, the virtual assistance could continue their duties, while you manage with a hands-on or hands-off approach.
However, before investing in an E-commerce store, you must thoroughly research the company to ensure that it is profitable and in a trendy niche. To do this, you can take the following elements into account.
The sustainability of the sales
An e-Commerce store can easily lose its momentum if the supply products are seasonal or hyped. For instance, if the store exclusively sold fidget spinners, its sales would no longer be sustainable, even if they peaked at a certain point in time. It is essential to invest in a store with sustainable sales.
Purpose of selling the store
Essentially, you must also investigate the reason why the store is up for sale. You must also review the profit and loss statement, prior to making an investment. Additionally, it is also important to review whether the store drives its traffic from paid advertisements. If most of the revenue is derived from paid advertising, purchasing the store may not be a good choice.
What contributions can you make?
If the store appears to be in good shape, you must carry out a SWOT analysis to determine if you can make any improvements in the store. If the effort is worth the cost, only then you should make your purchase.
Create an online course or guide
Another way to increase your residual income is by selling courses online. Online courses are extremely popular, as they offer widespread information, at affordable rates. If you want to generate an income from online courses, hire a field expert to teach the course. Once the course material is defined, you can market it on different platforms, or use paid marketing strategies to generate traffic.
Additionally, you can also set up a tiered payment system, and offer some basic courses for free, and charge for more advanced courses. This will attract an audience, whereas your course material would compel them to stay.
You further have the option of selling course licenses. This way, a third-party could use your course material, and handle the marketing and technical details themselves. This option would be a more hands-off approach to generating a residual income.
Place Vending Machines at Public Places
A vending machine business is one of the most convenient ways of increasing your residual income. Operating with cash and card, the business requires very minimal maintenance and storage. If you are willing to dabble in the vending machine business, you need to follow the ensuing steps.
Explore your options
The first thing that you need to do is to explore the vending machine franchises offered in your city. You can select a franchise, based on your budget. For instance, the Coffee-Bike franchise requires a minimal investment of £12,490. You must explore your options before making a decision.
Checkout public locations
The next stage is deciding the location for your vending machine. You must choose places that are extremely busy and crowded with people. Additionally, you can also gauge an understanding of the demographic, so your products can cater to their needs. For instance, you can add healthy juices at a vending machine outside the gym.
Pitch your ideas
If you want to place your vending machine at a specific location, such as a gym, you would have to pitch your idea to the owner. However, in this case, you may have to offer them a share of your earnings.
Purchase a Laundromat
Starting a laundry service can also increase your residual income. However, laundromats have gained momentum in recent years, as they now offer a plethora of other services as well.
As a laundromat is a necessity for most residents, you are guaranteed to get visitors, who reside in close proximity. However, to increase the profits, you must integrate state-of-the-art technology, while adding attractive features, such as a snack bar or a karaoke machine. If you can add enjoyment to an otherwise monotonous experience, you can open your laundromat to invite a larger demographic of people. To make this happen, you would need to rent out space, invest in machinery, and hire employees to handle the day-to-day operations.
Purchasing royalties can increase your residual income. This exchange can be set in variable methods. For instance, if you are buying royalties for a specific product, such as a book or music, the price would be based on the number of units sold. Conversely, royalties for commodities, such as minerals, oil, and gases, have a price system based on revenue or units.
Royalty exchange can be carried out on online platforms, dedicated to facilitating this process. You can carry out extensive research, before making an investment. Once you purchase the royalty, you would receive a payment, every time the product is used or sold.
Investing in royalties can increase the possibility of generating double-digit yields, that are often parallel to bonds and dividend-paying stocks.
Having some money will give a kick start to making residual income and there are a number of ways to do so. The question is which one would you choose from the list above?