Linear Income vs. Residual Income

Today, I want to take a few moments and educate you about the difference between linear income and residual income, so you have a better understanding of the two different ways of making money.  I also want to educate you about different ways to earn a residual income. We’ll also talk about the pros and cons of each.

Linear income is income you receive for working a specified amount of hours.  Basically, you are trading hours for dollars.  You go to work, you get paid.  You don’t go to work, you don’t get paid.  People who earn linear income are people on a salary, hourly workers, most commission based salespeople, most business owners, or ANYONE else that MUST physically go to work to earn their money.

On the other hand, residual income is income that you earn over and over from doing something one time.  Examples of residual income can include income from insurance premiums, network marketing, royalties from books, inventions and intellectual property, franchising fees, etc.

Most people just starting out in life will typically earn a linear income.  In fact, most people will earn a linear income their entire life.  Once again, there is nothing wrong with that.  The major benefit of a linear income is that you can earn immediate income to pay your bills and survive. You work 40 hours and get paid for 40 hours.  It’s really that simple.

The major drawbacks of linear income is that if you don’t WANT to go to work, or no longer can work (injury, too old, etc.) you can no longer make money.  There’s nothing wrong with linear income UNTIL you want a few months off, want to retire, or you get sick!  When that happens, you’re really in a bind.

Most people have only been taught how to earn a linear income.  I can’t speak for you, but I never received even 15 minutes of instruction about residual income in high school or college. I never even received one hour of instruction on how to start my own business.

In fact, most people are programmed from an early age to be an employee.  Go work for a big company (or the government), with good benefits, and work until they make you retire. Once again, there is nothing wrong with being an employee, or earning a linear income.  We need people to fill jobs.  I understand people need IMMEDIATE income to pay their bills.

But what if there was a better way to earn money that no one ever told you about?  What if you could create your own residual income with a part-time effort?

I truly believe that anyone could create a residual income part-time WHILE they kept their day job or linear income.  No, it doesn’t have to be network marketing either.  You could write a book to sell.  You could patent a product.  You could become a part-time insurance agent.  You could purchase real estate investments.  You could create music.  You could do countless different things.

The reason I typically recommend network marketing is because it’s much easier to do than most of these other things.  It’s probably the easiest way to create a residual income.  Most people will never write a best selling book or create an invention that pays them life-long royalties.  Most people won’t have the money to purchase real estate investments.  But, I truly believe that ANYONE can build up a residual income of a few thousand dollars per month within five years of part-time effort in network marketing.

Stress the word (five years).  This is not a get rich quick or fast way to build up a residual income.  To the best of my knowledge, there is NO fast or easy way to build up a substantial residual income.  It takes time, effort, money and some patience.

Some will argue that it’s not possible for the average person to build up a nice residual income working part-time, but I disagree.

At the end of the day, I believe that EVERY person in the world should have a linear income and a residual income.  They should focus on their linear income initially, but they should also invest at least five to ten hours per week to build up a residual income, so one day in the future they can have more time and more money.

What are your thoughts?  What do you think about linear income and residual income?  Leave a comment below to let me know what you think.  I look forward to hearing from you.

chuck holmes


Chuck Holmes
Network Marketing Professional (since 2002)
Author, Blogger, & Entrepreneur

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12 thoughts on “Linear Income vs. Residual Income”

  1. I personally like having a residual income. There have been so many times that I have been asked to do the job of three people, but only was given pay for one of those jobs. Or, I didn’t get paid what I felt I was worth because I do not hold a Master’s Degree. Having both the residual and linear income can definitely put you ahead of the game. Many times you can even work a seasonal job into the mix as well.

  2. I think you are right that most people only learn how to work for a linear income. Our colleges train people to enter the workforce not to be business owners. Even business schools for the most part train people to go to work for other people. As a result residual income is scary for some people. Which is why I think it’s great that you stress that it’s not linear or residual but rather keep working and build the residual income on the side. If done right, one day you can stop working and live off the residual income you’ve built up over time.

  3. I was never educated about residual income either. In fact I didn’t really know much about it until a few years ago. And I still always thought of it as just “extra money” until a year ago when I started freelancing.
    And I do think it is wise to have both sources of income if possible, until you’ve established yourself in your own business (whether it is network marketing or something else) to the point that where you can get by on just that income.

  4. There definitely was no mention of linear versus residual income in my classes either, but I do think it is worth the mention to get people thinking about the type of future they want to have. It is beyond wise to have some type of residual income in addition to their linear income so that when they are ready to take a break or stop working all together, they have the ability to do so. Otherwise, as you said your earning potential stops when you stop working and unfortunately expenses will continue to mount whether you work or not.

  5. As alligator man said, and you too Chuck, we are all taught throughout school to get a job, be at work on time, work 8-12 hours a day, and collect our pay. Linear income is all we are ever taught, and I believe this is done purposefully. In a sense, we are slaves to a system. Many hope that the majority of people will not learn how to make a residual income because that will deplete the workforce.

    As a book author, I have discovered that in time, I will be able to live comfortably off the royalties I receive from sales of those books. There is still a marketing aspect to it, but if I want to take time off, I can and the royalties still come.

    Network marketing works on that same principal. Yes, you still have to work, but it is a residual income that will allow you to take off when you need to. Everyone would do themselves a big favor by finding a system to create residual income.

      1. You are so correct with that Chuck. We all should know by now that you really cannot live off Social Security either.

        I believe that schools should do more about teaching students both about linear and residual income. So many people have no clue what residual income is, or if they have been taught, they have been taught negative aspects instead of the positives.

        Parents, please teach your children how residual income can help them have a better life.

  6. I agree with you that you can make a part-time residual income, am now in the process of building one now. An they don’t teach business in school at least l haven’t received any? People tend to put you in a box because, that’s what they have been programmed to do by the banks and by their parents, etc.

    1. In all actuality, most colleges do teach business courses, but the main perspective of those courses are for managing a traditional business. It would be good if universities would do more about teaching methods for attaining a residual income. I still believe the system is set up so that people are not shown about residual incomes for fear of depleting a workforce.

      It is in everyone’s best interest to find a method of earning residual incomes. Network marketing is a great source of doing that. This blog is great at showing a person the best ways to run a network marketing business.

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