How to make residual income from energy bills

Transcript via www.REV.com :

Hello and welcome to this online training. Over the next several minutes, it'll be my pleasure to teach you about the power of residual income. Unfortunately today, Americans are obsessed with get rich quick schemes. And that's what's led the economy to where it is today. But Americans don't spend enough time educating themselves on what the financial factors are that create the wealthy, the uber wealthy. The people that have time and money. And residual incomes the key to that. See, most Americans don't even know, over two thirds of them don't even know what compound interest even is. Half of Americans don't even know the interest rate on their own credit cards, and a quarter of them think the interest rates less than 10%. Unfortunately, those credit cards are maxed and it's going to take decades for Americans to even pay those off. So becoming financially literate is the first essential step in pursuing smart ways to make money. The old saying, "Work harder, work harder" just doesn't work. You want to work smarter, you want to work smarter.

                               So let's start with the definition. Residual, or passive income is income that continues to be generated after the initial effort has been expended. So you want to pursue incomes where you can do work once and get paid months, years, or even decades off of that one time effort. Unfortunately most people don't know how powerful that is. And most people don't know how to do it. So let's start with the power of residual income. And let's make some assumptions. Let's assume that the cost of capital, the money that you had to lay down to start pursuing residual income was $500. And let's assume that if you had a bank account that had a savings in it, that the bank would pay you 3% on that savings. Now today that's probably not reasonable, that's overstated. But that's okay. We'll give them the benefit of the doubt. We'll assume a 3% rate of bank interest that you can earn.

                               And let's assume that once you create this business, that you have to pay $149 a year to keep the business going. So that's an annual cost, it has to be calculated into our calculations as we look at the power of residual income. So let's assume that you invested $500 into a business or asset. And let's assume that for that one off investment of $500, plus an annual cost of $149, that you started producing a $15 a month income. Now, you're not rich by any standards. But a $15 a month income is the equivalent of having $6,000 in the bank upon which you were earning 3% interest. So you see you can do one of two things. You can save $6,000 in the bank and earn 3% interest which will generate you $15. Or you can pursue residual incomes with a capital cost of let's say $500 upon which you're returning $15 a month. If you invested $500 and only made $15 a month for the rest of your life on that initial investment, you would be making a 6% rate of return.

                               Now, rates of return are important to calculate because that determines how well your capital's working for you. See, if you invested in the stock market in the last ten years, you've lost about 25% of the capital that you put in. So you have a negative 25% rate of return. In this case if you took $500 and invested it and made $15 a month, you would have a 6% rate of return. And if it was guaranteed, it was an annuity, it was going to go into the future every single month. You could sell that business using a net present value calculation. You could sell that $15 a month income string for $1,487. So that would be a pretty good accomplishment, right? You took $500, you invested it into a business, you're returning $15 a month, which is the equivalent as if you saved $6,000 in the bank. The rate of return on that is 6%. And if somebody wanted to buy that business from you, you could sell it to them for $1,487. So residual income, passive income is very, very powerful because it is the equivalent of money in the bank.

                               So let's look at $100 a month in passive income. The equivalent that would have to have in the bank to return $100 a month in passive income would be $40,000 invested at 3% interest in the bank. Your rate of return is 211% off of that $500 capital investment. And somebody would buy that business off of you for $9,900.

                               If you were making $750 a month in passive or residual income. You've done the equivalent of saving $300,000 in the bank. What is you had $1100 in income? $1,100 a month in passive income is like you saved $440,000 in the bank. Let me ask you a quick question. Over the next five years, if you pursued a business part time that cost you $500 to start and after five years you had a $1100 a month income, do you think that's going to be easier to do than save $440,000 over the next five years? You would basically have to put into the bank $90,000 a year, or about $7,000 a month. You would have to save every single month for the next five years to produce the save passive income if it was earning you a rate of return of 3%. Matter of fact on that $500 capital investment, you've made a 2615% rate of return annualized. And somebody would buy that business off of you or $109,000.

                               If it was $5,000 a month, that's the equivalent of $2.2 million in the bank. If it was $11,000 a month of passive income it's $4.4 million in the bank. And if it was $20,000 a month of passive income, you would have had the equivalent of having saved $8 million. And you would have an asset that somebody would buy off of you today for $1.9 million. Let me ask you a quick question. Knowing the power of residual income, or passive income, how could you pursue any income that doesn't have a passive component to it? Once I discovered this, and I've got an MBA. Once I discovered this I realized I could never pursue linear income every again, time for money. Because what happens when you pursue time for money? You work an hour, you get paid an hour. You work an hour, you get paid an hour. If you don't work an hour, you can't get paid an hour. With residual income, or passive income, you can do work once and get paid months, years, or even decade off of that one time effort and that is the equivalent of having saved money in the bank.

                               So, let's revisit the definition again. Residual income is income that continues to be generated after the initial effort has been expended. So how can you get residual income? Well rental property gives you recurring monthly income. But does it have residual income? No, because you have capital costs, right, of maintenance. You have to pay for the expenses of managers or go do the work yourself. What happens if a pipe breaks, you gotta go do the work. So it is passive income, but it's not really residual income because you still have to put effort forward to produce that income. If it could be completely passive it could be considered residual income, but then again it takes a large capital investment.

                               What if you have to sell something every month, is that residual income? No. You go sell a home and you get a big commission on it. But do you have to go sell a home again? Absolutely. So is that residual income? Absolutely not. What if you got a network marketing business that sells product, is that residual income? No, why? Because everybody has to sell every single month for the rest of their lives. Yes, you do have leverage. Yes, you do make income on a monthly basis off of those sales. But if nobody sells every month, a pill, a potion, a lotion, a juice, then you do not have a residual income. So people a lot of times they'll tell me, "Well I have residual income because I'm selling this juice". But you don't because if you don't sell the juice, you don't have the income. You have to sell for the rest of your life.

                               So what kind of true passive incomes do we have? Well, writing a hit song or making a movies a residual income. Because if it ever gets played again in syndication, or on a radio station, you get a check. So that is truly doing work once and getting paid over and over and over again for that one time effort. Just think of Elvis Presley. Still, he's one of the highest compensated entertainers in the world today. And yet he hasn't written a song in decades. So that's true residual income. The problem is I can't sing and I can't dance.

                               What if you could get paid when people paid essential bills, would that be residual income? Well, of course. Why? You do work once, and then every time that somebody uses it, which is essential to life. Listen, if you left home without your cell phone, did you do an illegal u turn across traffic to go get it? Of course, right. If you're television's not working are you upset. If your internet goes down. So these are the bills that everybody has to have every single month. You don't have to change any buying habits. You don't have to ask people to spend money they're not already spending. So if you can find a way to get paid when people pay essential bills, you would have the ability to produce residual income.

                               So that's just a quick definition to the power of residual income. Whatever you do, I don't know what you're doing to pursue residual income. Here's my only word of advice for you is pursue it. Find it, find a way to make residual income and do it sooner, not later. Because it is the key to wealth. I hope you enjoyed the training, have the remainder of a great day. 

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Thank you,

Daniel Schildt, (585) 376-0088

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