Residual Income That Just Keeps Coming In

By Louis Charles Martel

Your residual income is the financial little extra that is leftover in your hand after your bills are paid each month. The financial obligations are paid off and any extra money is left as passive income. But don't forget to plan for every bill, not just the ones for this month, but the quarterly payments also.

If you need $1500 in your budget for monthly expenses and you earn $1900 a month, that extra $400 is your residual income. You haven't done anything other than go to work and put your best day to the job you do. The $400 left over from your earned income is now residual income.

Other forms of passive money result from interest-bearing checking accounts, dividends from stocks and even money received from rental properties. Passive income comes to you as the result of a prior purchase or savings plan. The work you did before retirement counts toward your payment of a pension. The pension check is now residual income.

If you have a mortgage on your home or the home you rent out, upon the complete payment of that mortgage, the funds you use to pay to the mortgage company is no longer needed there so it becomes residual income. It's like there is now an empty space where money is no longer needed. You can stash that money away as residual or replace the mortgage payment with a boat payment. It's up to you.

The amount of passive income you can show a bank when applying for a loan is paramount in the bank's decision to lend you the money. It shows them that you have enough funds to assume the responsibility to repay the loan. With the loan money in hand, you assume a payment plan and may be paying less interest on the loan than you would have lost by dipping into a great stock that provides steady residual income.

Income is taxable. It is the way our country works, and every time you gather money as income, you give Uncle Sam his share. The interest earned, the income from rent and the royalties from the sale of a book are all taxable income. Some states have rules about the tax on pension checks. In some states, pension checks are taxable.

As with any earnings, you should make sure you keep accurate books. Sloppy bookkeeping can run you into trouble with the IRS. If you are still employed and have several rental properties, stocks, bonds and other residual income ventures, you might need help from an accountant. You need to make sure that you save receipts for ease in doing your taxes.

Look beyond today when you choose the money makers of tomorrow. Set up and put in place some sources that will provide you with residual income in the years to come. Be aware of how to plan for the future and how to use that planning to promote some residual income. The financial little extra can become your ticket for the future.

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