What Is Residual Cash?

Residual cash refers to a form of passive income an individual or entity receives over a period of time. Residual cash can be an important component of your income because it does not require active involvement or work to maintain. Although there are several opportunities for residual income, certain unscrupulous companies prey on those seeking residual cash income.

Opportunities

There exist various opportunities to earn residual cash income. Major categories include online freelance writing and multi-level marketing. Freelance writing covers a wide range of activities that can produce residual cash income, such as writing blogs, ebooks and websites. In freelance writing, the residual cash usually comes from website advertising income or sales of ebooks. On the other hand, multi-level marketing involves selling not only the products of a company but the business itself to other individuals. In multi-level marketing, you can earn residual income from the individuals who you brought into the business.

Taxes

Residual cash income is almost always treated as self-employment income. This is because most, if not all, of the residual cash income opportunities result from working for oneself and not for another individual or company. Therefore, self-employment income is taxed not only on the basis of your regular income tax bracket but also on the basis of self-employment taxes. These taxes include Social Security and Medicare taxes. Self-employment tax, as of 2011, is 13.3 percent.

Dangers

Residual cash has many pitfalls associated with it due to unscrupulous companies and individuals looking to cash in on ignorance. These companies will often attract you with too-good-to-be-true sales pitches. You may be promised extraordinary wealth and success with that company's particular residual income strategy. You should be particularly careful when dealing with opportunities that require a deposit from you, or ask for intrusive personal information, such as your Social Security number.

Benefits

Although obtaining a residual cash income can be difficult, once this type of income is secured, the benefits are huge. Obviously, any sort of extra income is beneficial. However, residual cash requires no extra effort to maintain the stream of income. This permits you to focus your time on leisure activities or on other projects that will earn you even more income. Residual cash income can permit you to release yourself from the day-to-day grind of a job.

References

  • "The Parable of the Pipeline: How Anyone Can Build a Pipeline of Ongoing Residual Income in the New Economy"; Burke Hedges; 2007
  • "The Complete Idiot's Guide to Working Less, Earning More"; Jeff Cohen; 2008
  • IRS.gov: Self-Employment Tax

About the Author

Andrew Mayfair has written professionally since 2009 when his article on patent law was published in the "Loyola of Los Angeles Entertainment Law Review." Mayfair earned his Bachelor of Science in biochemistry from the University of California, Davis and his Juris Doctor from the University of the Pacific, McGeorge School of Law.