On our Internet Income page, we briefly looked at the different kinds of income you can earn.
For the purpose of that page, residual income and passive income were grouped together as the same thing. This is a frequent occurrence in internet marketing communities, but actually when you look at them in detail they are not the same thing. The purpose of this post is to look at them in more detail and answer the question ‘do they even exist?’
Both terms conjure up images of endless amounts of money flowing into your bank account while you’re off lounging by the pool or sleeping in, while everyone else is stuck in rush hour traffic. And what a lovely thought that is! But does it sound to good to be true? Have you considered what you would do if and when you reach that goal? This is the best place to start when looking at the difference between the 2 types of income.
What is the difference between passive and residual income?
Lets start by looking at people who have ‘made it’, people who have gotten themselves into the position of having lots of money coming to them on a regular basis. People like Richard Branson, who is apparently worth $5.1 billion, JK Rowling worth $1 billion and Mark Zuckerberg worth a staggering $37 billion. I think it is safe to say, they could lounge around as many pools as they like, for as long as like, in whatever country they like! BUT they don’t. I’m sure they all do at times, but the point is they have all worked very hard to get to this place and they STILL do.
The key difference between residual and passive income is basically the amount of effort you put. Residual income is generally considered to be income that is acquired as a result of a lot of initial hard work. Passive income on the other hand is getting regular payments for little or no effort.
So what category would Mr Branson and friends be in?
My personal take on this, is that they are earning residual income, because they still work very hard. What they are doing is setting themselves up for passive income for when they decide they’re done. Overtime residual income can become passive.Well, it can not be disputed they have all worked very hard to get to where they are today, and as they continue to do so, that would put them in the category of residual income. But if they decided to retire and spend the rest of their days lounging by the pool, they are in a position where they would continue to get paid regardless. So this would put them in the category of passive income.
In the about me section I referred to an eBook I had written a few years ago. I worked very hard for a couple of weeks getting it together, and then spent time promoting and advertising it. This allowed me to bring in about $300 a month. This was my residual income. Since then my focus has changed and I do not spend any time promoting it or doing anything at all with it. I am still consistently getting $60 a month from it. This is my passive income.
There is no limit to the amount of income you can create!
I mentioned earlier that the amount of effort you put in is basically the difference between passive and residual income. This is the same for the level of income you can expect to bring in. The eBook for me was an experiment, I can not say I put in the same amount of effort into my writing as JK Rowling, which is why she is worth $1 billion and I am not! But I do know that if I continued to focus my effort into that project, I could earn more money.
And this leads me to my conclusion and the answer to question in the title, that yes, both passive and residual income do indeed exist. But you do have to be prepared to work hard to achieve them. ‘Quick easy money for minimal effort’, are the sorts of thoughts and images created by the phrases passive and residual income, because that is what crooked dishonest marketers want you to believe. It all seems to good to be true because it is! This is often why the question ‘Does passive/residual income even exist?’ gets asked so much.
The reality of residual and passive income is they really do exist. but the more income you want, the more effort you have to put in!