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The Power of Residual IncomeI don’t normally share specific details about my finances.  It’s just not a great idea on the Internet, but I think I need to share a bit more than usual to illustrate this point about the power you can generate from residual income.

Residual income can be many things – it can be interest income from a savings account, small royalties or dividend payments from creative work or investments, or even rental fees from income property.  In my case, my residual income takes the form of small payments from some minor oil leases that have been passed down through several generations of my family.  

The exact details are hazy – this all happened decades before I was born but from what I can piece together, my grandfather or great-grandfather had a business investment in some budding oil wells in Kansas.  The business dissolved at some point, but he retained some partial shares in the oil rights as his share of the partnership.  This was probably in the 1920’s – almost 100 years ago.  

By the time I came on the scene in the 60’s, the older generation had passed away and the oil shares had been inherited by my Dad and his brother.  Even though amount of shares must have been very small – (the portion I eventually inherited is incredibly tiny, not even 5% of one share), it was enough to provide my father and his brother with a fairly steady income – about $600 or $700 a month, which was a handsome sum of money back in those days.    

However, the oil business is a chancy thing and by the time I was in High School, the flood had dwindled considerably and he signed a portion of the shares over to me in lieu of my allowance when I turned 16.  At that time, it was bringing in a regular $80 or so a month, which was just enough to pay for gas, insurance, and repairs on my junky little car.  So, this tiny little investment had already provided varying amounts of income to my family for over 40 years.  

I’m now in my 50’s and my folks are now gone, but my little checks just keep rolling in.  I’m the only person I know who is pleased when gas prices go up, because I know my checks will increase accordingly.  But then when it goes back down, my checks dwindle as well – so it’s small, but steady.  It’s very random because they accumulate them until the amount is at least $100, but the checks always seem to show up when I most need them.  I think of it as my Dad still sending me my “allowance” when he sees things getting a little tight down here.  

So, why am I sharing this with you?  I think it’s pretty amazing that this minor investment that my grandfather probably gave very little thought to, has sustained our family in large and small ways for nearly 100 years.  It has paid for groceries, car insurance, vacations, college tuition, and a host of other things that has brought his decendants comfort, security, and enjoyment.  

I’m sure he was tempted to sell it at some point, and probably so was my Dad.  I get offers probably a couple of times a year – generous offers of thousands of dollars for my tiny little annuity, but you know, I won’t sell it unless I am absolutely flat broke and headed for the streets.  In that way, I think I am different than a lot of people.  I know some of my cousins have received these offers and sold their shares off.  But think about it – that’s like killing the golden goose.  If these companies are willing to offer me that much money for them, you know the lifetime value of it must be much greater, but most people just see the big chunk of money and don’t see the value of all the tiny little checks.  And these large companies can well afford to be patient because they have thousands of these little annuities pumping out their little checks month after month and year after year.  

And if I had taken their offer what would I have done with that money?  I would have paid a bill, bought a car for one of my kids, or maybe splurged on a nice vacation.  But then what?  No more checks, no more little surprises, no more extra money to tuck away for an unexpected bill, or a little weekend getaway when I need one.  It’s like trading your paycheck for a wonderful meal, but after you’ve eaten the meal, then what do you do?  

With any luck, I’ll be able to pass this legacy down to my own children.  In fact, I’ve been keeping my eye out for a similar investment of my own.  It’s definitely tricky to find something that is a good deal and is going to result in a comfortable income, but it is definitely worth looking into.  I would love to be like my grandfather and have a legacy like this to pass on to my grandchildren and unborn great-grandchildren.  Wouldn’t you?  

Image courtesy of Khunaspix at FreeDigitalPhotos.net


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7 Comments on The Amazing POWER of Residual Income

  1. Thanks so much for sharing! I am a big proponent of residual income and there are so many different ways it can happen. I think it’s awesome that your grandfather’s one decision has made such an amazing impact on your family for an entire century! And yes, residual income is amazing, very freeing and can be passed along to future generations.

    • Exactly! I think people get dollar signs in their eyes when they see these big sums of money, but sometimes these small steady-type things are a lot MORE help in the long run.

  2. So cool! I have a little annuity that my grandfather bought for me when I was little. For a long time, I held onto it because it would insult him if I sold it. That little bit of money keeps growing and growing. As I get closer to retirement age, I’ve decided to just let it sit until I need it. Maybe it’ll be something I end up gifting MY kids. #SITSblogging

    • That is SO smart. I have another story I will share in a different post about some savings bonds I bought just after my oldest son was born. I hung onto them until he was a teenager, and they ended up paying for a good chunk of his college education!

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