Money is important in the modern world, and we all know that to earn it, we have to work and work and work. True enough, income is almost always earned through gallons of blood, sweat, and tears. However, there are some individuals that don’t need to go through all the trouble just to make money. They simply sit back in their homes, relax, and see check rolling in. Such money is known as residual income.
Residual or passive income is the money that you earn which does not require any sort of work. It certainly allows you to earn money in a lax manner – not through eight hours of work in a workplace you may not be comfortable with.
The Difference Between Active and Residual Income
Income is the money that we earn every month or so, as opposed to the money that goes out of our pockets. Now there are two sorts of income. The first one, which we are most familiar with is called active income. This income is earned through work, or any other activity that one is directly involved in. Such includes the salary one gets from his or her job, as well as all the extra money earned on the side.
Residual or passive income on the other hand is the exact opposite. Passive income is money that you earn without practically doing anything. This is earned passively, without any direct involvement with the source. This however can only be earned after making a big investment.
For instance, one example of a passive source of income is real estate. The rent that you earn is definitely some easy money, but this won’t be possible unless you have constructed a residential building for the purpose of being rented out. Now the construction, plus many other fees is going to be your investment. While this can be really high, you can say that it’s still worth it, as the passive income you’ll earn through it is always a good thing.
Either types of income can help you earn the money you need to pay for your needs or even enough to help you achieve financial stability. Passive income however is arguably more appealing. Why, making money without even doing something to earn it is always a good thing.
Popular Residual Sources of Income
There are countless ways through which you can earn passive income. Here are the most popular ones:
- Corporate shares. If you own some shares in a corporation, you get paid dividends, or a share of profit proportional to the shares you own.
- Limited partnerships. Not all entrepreneurs involved in a business partnership get to do the work. In limited partnerships, one can simply provide all the capital necessary and still earn a cut from the profits every month.
- Real estate. Rents paid by tenants are considered passive income, as it is mandatory and the landlord doesn’t have to work to make the tenants pay. Real estate also have another advantage however – you can evict your tenants anytime and sell the property for a very high price.
Without a doubt, residual income is a great alternative to income that you still have to work for. It is thus wise to work while you can and save money to invest on a source of passive income that can earn you money even if you lose your job.