Create a Perpetual Income

There are many reasons why you should consider starting a home-based business. Beyond the tax benefits, I’m sure you’ll agree with me that it’s just common sense to have multiple streams of income flowing into your life. Prosperous people have always known this. If one stream dries up, they have others to support them. Having only one stream of income leaves you vulnerable. If you lose your one stream of income, it could wipe you out and take years to recover.

How much of an economic and emotional impact did your last layoff have in your life? If you’ve ever lost a job, you know how totally exposed and vulnerable it can make you feel. So, although launching a home based business may seem like a gamble, the risk of remaining strictly a W-2 employee may actually be worse.

I strongly recommend that you ultimately develop a portfolio of income streams – not one or two – but many streams from completely different and diversified sources so that if one stream goes, you’ll barely feel the bump. You’re stable. You have time to adjust. You’re safe.

Although you could always go out and pick up another job, that’s really not the kind of income I’m talking about. You want the kind of income streams that you can own. Ideally, you want to create residual income, meaning a recurring stream of income that continues to flow into your life whether you continue working or not.

Unfortunately, I’ve heard too many small business owners report that they’ve gone five years without taking a vacation. I feel there’s something wrong with that picture. Please understand me; I don’t have anything against hard work, but I also believe that you should be free to have your income forwarded to your mailbox in Tahiti after a few short years of hard work. Get the picture?

Not all streams of income are created equal. Some income is linear; other income is residual.

If you are currently paid hourly or on a salary, your income is linear.

Income from a salary is linear because you are only paid once for your effort. When you don’t show up for work, neither does your paycheck.

With residual income, you work hard once, and it unleashes a steady stream of income for months or even years. You get paid over and over again for the same effort. For example, an author will write a book one time and yet be paid repeatedly for that book for years to come.

Although it might take years to write before the money starts to flow, it’s worth the wait.

You’ll find that the ultimate benefit of those who are truly wealthy is that work is optional and leisure is affordable. This is because most of their income is passive and residual. Therefore, they can spend their time doing whatever they want.

When you start to view people’s lives through a filter of residual income, many groups of people aren’t really as wealthy as they may otherwise appear. For example, Doctors and Dentists have a limit on their income potential. They can only see a fixed number of patients in a day. And they have to be there for every single one of them. That’s linear.

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The same holds for many top salespeople, chiropractors, and attorneys. Most of them don’t enjoy the benefits and power of a perpetual income. They may appear to be rich, but they’re on the same treadmill as most individuals. Can you see that?

To drive this concept home even further, let’s compare it to an escalator. Have you ever walked up a down escalator?

When you walk up the down escalator, you have to walk at a fast pace to stay in the same place, and to get to the top; you have to walk at double speed. By contrast, people on the up escalator don’t have to work hard at all, they stand there holding the handrail, and the escalator takes them to the top.

I feel the up and down escalators give you a good visual perspective of the two kinds of income you can earn: linear income vs. residual income. Our economy creates a down escalator each of us must climb. You work hard for your money, but you have to earn 3 to 5 percent more the next year to stay in the same place with inflation.

But this puts you in a higher tax bracket. The more you make, the more they take. You seem to work harder and harder without making any progress. Your bank account balance might earn 2 percent if you’re lucky, while your credit card balance may cost you 20 percent.

Consequently, you’re going in the hole 24 hours a day. Is it any wonder you can never catch up?

And if you stop, the escalator takes you right back down to the bottom.

That’s what it’s like to earn a linear income. What you want is up-escalator income, or in other words, perpetual or residual income.

Right now, what percentage of your income is residual?

If you’re smart, you’ll start shifting your income streams from linear to residual. This will give you the time freedom to do whatever you want when you want. And that starts with turning on at least one new stream of residual income.

So, as you begin considering different home-based business possibilities, make sure that it can ultimately develop into an inexhaustible, generating stream of cash flow that requires little or none of your presence. For this to occur, you must be in a position to create, control, and own that stream of income. You may remain in your current employment position, but on the side, as a way of protecting your long-term financial security, you need to create additional streams of income.