Residual Income Through Real Estate
Most people make their income linearly, which means they have a “Linear-income”. This simply means that for every hour they work they get an X amount of income.
With a linear-income a person must keep working if they want to keep getting paid.
In the United State the average person works a 40-hour workweek not to mention all the other time spent away from the home due to having to work. Let’s say that the average is 50 hours per week.
If you consider that the average person gets 2 weeks of vacation, you will see that 2500 hours per year are spent on the job. Take those hours over the typical 45-year work span, and you will have worked 112,500 hours!!
If you could go back and average all the income over that 45-year period, you might find statistics like this:
Average Annual Salary of $30,000 is equivalent to $12/hour before taxes and a mere $7.80 after taxes (assuming a 35% rate of taxation)
Average Annual Salary of $40,000 is equivalent to $16/hour before taxes
Average Annual Salary of $50,000 is equivalent to $20/hour before taxes
When you look at the examples above, there is a pattern that might catch you eye.
For each $10,000 more made per year, you can add $4/hour to your hourly rate of pay. I can almost guarantee you that if you follow this type of system to make your money, you will have a very difficult time becoming wealthy.
Everyone has heard of diversification, especially when talking about finances. If you choose stocks, you are told to diversify. Why? Because it is too risky to put all your eggs in one basket – this is simple logic.
And yet, if you look at most people today they almost always have “all their eggs in one basket”. What I’m talking about of course is most people have only one way of getting income: their job.
Most people have ONE paycheck that goes into a bank and then comes out of the bank for a variety of fixed expenses. The only diversification in this picture is the number of ways the money flows OUT of the bank! If your cash flow fails due to sickness or inability to perform the given tasks, you will lose all of your assets.
So, what’s better than linear income? Why it’s residual income of course!