If you’re interested in building wealth and achieving financial freedom, you’ve likely heard the terms residual income and passive income. Both types of income have become popular buzzwords in the world of entrepreneurship and investing. While these terms are often used interchangeably, they are in fact very different — so in today’s post, we’ll explore the key differences between residual income and passive income and shed some light on these phrases so you can decide where to focus your financial efforts.
Residual income is money that you earn from work that you have already done. This type of income is often associated with royalties or commissions. For example, an author who has written a book will earn royalties on sales of that book for years to come. Similarly, a salesperson who earns commission on a sale will receive a percentage of the sale each time the product is sold. Residual income is sometimes referred to as “mailbox money” because it continues to arrive in your mailbox long after the work has been completed.
Passive income is money that you earn without actively working for it. This type of income is often associated with investments, such as rental properties or dividend-paying stocks. With passive income, you make an initial investment and then receive regular payments without having to do any additional work. However, it’s important to note that while passive income may not require active work, it does require active management. For example, if you own a rental property, you will need to manage tenants, make repairs, and handle other issues that arise.
Residual income vs. passive income
The key difference between residual income and passive income is the amount of effort required to earn the income. Residual income requires some initial effort to create a product or service, but after that, the income flows in with little to no additional work required. Passive income, on the other hand, requires an initial investment and ongoing management to ensure that the income stream continues.
Another key difference between the two types of income is the level of control you have over the income stream. With residual income, you have more control over your earnings because you are receiving a percentage of the revenue generated by your product or service. With passive income, your earnings are dependent on the performance of your investments, which can be influenced by factors outside of your control.
Residual income and passive income are both powerful tools for building wealth and achieving financial freedom. Understanding the differences between these two types of income is important when deciding which one is the best fit for your financial goals. Whether you choose to focus on residual income or passive income, the key is to start early, invest wisely, and be patient. With time and effort, you can create a reliable income stream that will help you achieve your financial goals.
Passive income, in particular, has been my focus for years now — by throwing my weight behind flex space, I’ve managed to generate millions year after year. So, if you’ve made it this far, I encourage you to check out Flex Space Untapped. Along with my team of experts, I’m teaching everything I’ve learned after nearly a decade of finding, building, and scaling flex space developments to create true financial freedom. Your search for true passive income is finally over — now it’s time to get started.
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