Last week, we talked about the importance of setting goals and breaking them down into bite-sized pieces (if you missed it, you can read it here). This is foundational for success in business and in life, so if you’ve not set specific written goals, I encourage you to make that a priority in your life in the next few weeks.
Once you’ve set goals and are ready to move forward toward them with focused intensity, it’s time to move onto step two:
2. Change Your Mindset About Your Income
When Jesse and I were going through our lean law school years, I did extensive research online looking into any and every possible way I could earn income from home. The more I researched, the more convinced I became that I needed to change my mindset about earning an income.
You see, for years I’d always worked multiple side jobs. I made decent money, but the income was dependent upon how much I worked. If I didn’t work, I didn’t earn money.
The more hours I invested in work, the more money I earned. So my pay was equal to the effort expended.
I started realizing that, with my current mode of operation, the only way to get ahead financially would be to work more and longer hours–provided I could find work to do. What I really needed to focus on was setting up residual income.
What is Residual Income?
Residual income is a cashflow that is not dependent upon the number of hours you work. In most cases, it requires an upfront investment of time and resources and it requires some maintenance and upkeep, but it continues to bring in a stream of income even if you invest little into it.
My first foray into the world of residual income was my experiment in selling ebooks and printed booklets through my website. Printed booklets took more time to produce than ebooks and produced a much lower profit margin since I had to invest in physical materials. Ebooks, on the other hand, could be an automated source of income.
In the beginning, I rarely made more than $5 per day selling ebooks. But $5 per day was a start. And considering that it only required a one-time upfront investment of time, I quickly realized that making an automated $30 to $50 per week every week for almost zero work (except for the occasional customer service email) was nothing to sneeze at–especially considering that the initial ebook usually only took me 10 hours to put together.
Over time, as my customer base grew and I improved my products and marketing, I was making a guaranteed $400 to $500 per month off of ebooks and ecourses. On the months when I produced a new ebook or put together some sort of package special, I’d sometimes make twice that amount!
Needless to say, I was definitely sold on the idea of residual income. However, as my customer base grew, so did the customer service load. And by the time MoneySavingMom.com had really started to take off, I decided to quit selling ebooks in order to focus on providing high-quality, free content at no charge. We no longer needed the extra income from ebooks and I decided that a business model of offering all downloads for free (resulting in a lot less customer service issues!) was better suited to the season of life and the business direction and goals I have now.
Currently, we’re saving towards investing in real estate as we’d like to take residual income to a higher level. Our dream is to one day earn more from residual income than we do from our business incomes–not only so we can give more generously, but so it frees us up to possibly take new directions with our businesses.
Turn Your Knowledge Into Residual Income
Joy from Preschool-In-A-Box is a great example of someone who turned her knowledge into residual income. She’s a mom of three who started her own in-home preschool a few years ago. In the process of starting her in-home preschool, she found that there weren’t resources out there offering tips on how to do it.
After she figured it out on her own—and made a lot of costly mistakes along the way!—she determined to make it easier for others who wanted to do the same. After months of testing, tweaking, and refining her preschool, she put together Preschool-In-A-Box–a kit that packages up all of her knowledge and everything she’s learned over the past few years to save someone hoping to set up an in-home preschool an enormous amount of time and effort.
This is brilliant! If she were trying to increase her income teaching preschool, she’d have to take on more students or teach for longer hours. Instead, she took her knowledge and created a product. This one-time investment of time to put together the Preschool-In-A-Box kit has likely made her far more than she could ever make in years of teaching preschool–and it doesn’t require her to put in incredibly long hours over a long period of time.
Do you see the beauty of residual income? After the initial investment, it can actually free you up to work a lot fewer hours and make more money.
Since your time is valuable, you might as well make the most of it by looking for ways to set up residual income streams. Best of all, if you lose your primary source of income, these residual streams provide you with something to fall back on!
…to be continued next Wednesday