Whether you’re a full-time employee or looking for ways to supplement your earnings, achieving financial stability involves understanding the different income categories. Knowing the various opportunities for you to earn money can help you realign your efforts.
Passive income and residual income are too often misunderstood to be the same and used interchangeably. Much of the confusion between the two terms revolves around its use in online business and the financial sector. Therefore, passive income and residual income may depend on the specific industry using them. Here is a breakdown of the difference between passive income and residual income:
Passive income refers to the money you earn from a source outside an employer or contractor. It’s a stream of income that many seek to supplement their primary source of earnings or rely on to get them through a period of unemployment. As an additional income source, it helps increase financial security, especially in these turbulent times.
“Passive” is described as doing little or nothing to influence the outcome of a situation. For this reason, passive income is considered earnings that require minimal effort. However, those who rely on passive income know that it’s something they may have to work on actively with involvement ranging from low to high. And by no means should the money you make from passive income be considered insignificant; however, in comparison, it’s not meant to replace the earned income from a full-time job, which is taxed differently.
There are various categories that residual income may fall under, including equity valuation, corporate finance, and personal finance.
“Residual” refers to the quantity that remains after the greater part of something has been subtracted. From this definition, we may assume that residual income is the money left after deductions. However, residual income in personal finance refers to the money earned after the work has been completed and personal debts and other obligations have been deducted. This is why residual income is often referred to as disposable income because it’s what’s left after tax deductions and other charges.
Similar to passive income, residual income does not come from a salaried job or hourly wages. Rather, residual income typically requires an initial investment of either time or money to support a steady income stream.
Maintaining that ever-elusive work-life balance is the definition of success these days. However, the reality is that earning enough money remains a top priority.
In today’s unpredictable and turbulent environment, finding both passive and residual income will give you security. You can earn passive income with minimal effort to supplement your earnings and make residual income which you can contribute to your emergency fund. Investing in home business opportunities is a good way to earn both income categories because they often don’t require a specific education level or business experience.
When it comes to achieving financial success and stability, earning passive and residual income can be done in the comfort of your own home. Let’s talk more about business opportunities to look out for in 2021. Contact us today!