How Do You Build a Strong Residual Income Stream?

How do you build a residual income stream?  How should you think about building a residual income stream?  What is the use of building a residual income stream?

Imagine it took an entire year to work on obtaining an asset that paid only $200/year for the rest of your life.  Most people would not be impressed.  Then again, when it comes to finances, you don't really want to be most people do you.  When the average American has less than $25,000 in their retirement account, why would you want to be most people?

The question is how valuable is an asset that generates $200/year.  Well, how much money would you need to invest to get a return of $200/year?  Assuming a 5% rate of return, an asset which generates $200/year is worth about $4,000.  This means that if you spent an entire week devoted to picking up this asset or 40 hours, you would have earned $100/hr.  That sounds a lot more impressive, doesn't it.

In addition, an asset which generates $200/year may be in a particular form where the income is almost guaranteed.  If this is the case, it may be more useful to have this asset than the $4,000 which may not guarantee the income.

So, how do you build a strong residual income stream?  One brick at a time.

What types of assets can generate a residual income stream?  Which expenses do you currently pay which are a part of someone else's residual income stream?

This post was reposted from http://finlit.biz/business/how-do-you-build-a-strong-residual-income-stream/, originally written on February 11th, 2013.