Imagine doing something once and getting paid for it over and over again. This is how actors, authors, and distributors get paid. They all get paid a percentage of how well their work is performing. For example: an author gets paid in royalties based on how well their books are being sold.
Filmmakers receive a residual income as well. They get paid based on the amount earned in the box office and how many films have been distributed.
Residual income seems like a dream salary, but even this has it’s limits. Residual is all based on how much people like your product. So, just because you write a book doesn’t mean that you’ll shoot right up into the best-seller’s list. Still, a residual income is an interesting way to make a living and it is only interesting because it is never stable. Some months will do better than others because your getting paid when people buy your products.
Now you can see the difference between a residual income and an hourly wage. An hourly wage is when you are getting paid for working a certain amount of time. In a way, working eight hours a day provides more security because you are guaranteed a certain amount of money when you get your paycheck. Working an hourly wage is more stable than a residual income and residual can be a way to make even more money.
Business owners make residual income while employees make an hourly wage.