What Is The Difference Between Passive And Residual Income Streams?

What Is The Difference Between Passive And Residual Income Streams?

Passive income is any income that you make without actively doing any work, hence the term “passive”. In most case, the money comes from various investments that you already made. You don’t need to be directly involved with the money that you’re making. A good example is offering rental services like a house, car or equipment. Your initial investment is made when you purchase the item which you’re now renting out. At the end of the day, you collect money from the person who’s renting the item. Stocks are also another good example of passive income. If you buy stock and its value increases, you get passive income from it. Pay per click advertising and SEO are also examples of passive income.

Residual income is any extra income that you make off a particular item/service even after you’ve initially sold it. You create the item just once and can collect plenty of revenue from it even years after its initial sale. The payments are agreed upon in advance. An example is royalties which you receive from publishing a book, song, or film. You create a song once, register it with a copyright society and publishing company, then you can receive royalties every time it’s performed, shown in a film, or broadcast on radio. Another example is selling services online. You can sell a service which people subscribe to. Every time that subscription is renewed you make residual income; money made beyond the initial sale. Other examples include affiliate programs and network marketing.

It’s important to have one of these types if income because you’re assured of getting some money no matter what. You don’t have to do any extra work beyond the initial investment/sale in order to generate this type of income. So it gives you an extra source of money which you can invest in other ventures if you wish. Just make sure that if you plan on making residual or passive income, the initial steps should be rock solid. You don’t want to have to maintain the service rigorously; it stops being residual/passive if that’s the case. If you implement it successfully you may never even have to work a day again in your life. There are many musicians, authors, film makers, and even ordinary people that make huge amounts of money passively.

Photo credit: Tax Credits via Foter.com / CC BY

Related Posts

Legitimate Survey Sites That You May Not Have Heard About

Taking online surveys is one of the easiest ways to make extra cash. The great thing about taking surveys is that you don’t need to have any special skills; you just need to give your opinion on a particular subject or product. You may wonder why companies pay you to take surveys. It’s because surveys […]

How To Make Money Through Amazon Associates

How To Make Money Through Amazon Associates Amazon Associates is an affiliate marketing program which is run by the world’s leading online retail company Amazon.com. It essentially operates similar to any other affiliate program; the major difference is the commission that’s paid. For those who are not familiar with this concept it’s simple; you lead […]

Best Businesses To Start When The Economy Is Down

Best Businesses To Start When The Economy Is Down A down economy could be a terrible time for some companies, but other businesses thrive in this kind of situation. These companies are called counter-cyclical businesses. It is not easy to start a business at a time when the economy is down, but if you can […]

Search For Unpaid Back Wages

If you think that you are owed unpaid back wages held by the  US Department of Labor Wage and Hour Division there is a site where you can search. From the site:   The Wage and Hour Division (WHD) enforces some of our nation’s most comprehensive labor laws. When we find violations, we often recover […]

What is a casting call and how can you earn extra cash by attending one

A casting call is a process whereby various people audition for parts in movies, plays, TV shows, and other roles in the entertainment sector. Casting calls can take any format that the casting director chooses. However, the vast majority of them either require you to prepare your monologue, skit, or musical performance. In other cases, […]

How To Make Money Selling Your Crafts

If you are a creative person, you have probably channeled that creativity into the arts to some extent. Some people like to draw and paint, others to create jewelry, and some like pottery. There are only too many ways that you can make the world a little bit more beautiful with something you made yourself. […]