passive income vs residual income

Passive Income versus Residual Income

Do you know the difference between passive income and residual income?

Throughout 2015, I’ve seen a lot of marketers mistake the term passive income and residual income, and here we are on day two and I’m still seeing the same mistake.

Now, it seems humorous to me to see an entrepreneur spending all of his time doing online marketing, promoting a product or biz op offering “passive income”.

I wanted to share one of my Facebook status updates in which I addressed this issue, explaining the difference between the two.

There seems to be some confusion about the term ‘passive income’. Just because you have residual income it doesn’t mean it’s passive.

For example, you have to go to work nearly everyday to earn a paycheck. Your paycheck is residual (comes in week after week, month after month), but it isn’t passive. You stop working and the paychecks stop.

Passive income is money that comes in whether you are working or not. It is not directly tied to your time – that’s what makes it passive.

If you have to bang the phones every day, chase down leads everyday, babysit teams in meetings every day, and more to keep your money coming in, that’s not passive income.

If you create a product, set up your marketing, and walk away to hang out with friends, go home and watch movies, then go to bed and sales are coming in, THAT is passive income.

Money that keeps coming in after the initial work is done.

Whether it’s massive cash flow from one-time sales or commissions, or residual income that pays you month after month (such as memberships), passive income is a huge part of how wealth is created and that should be the goal of every entrepreneur and business owner.

I sincerely hope this clarifies things for marketers out there who didn’t quite know the difference before.

Source: Let me know what you think on Facebook or leave a comment below.

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Entrepreneur, programmer, musician, stay at home uncle, video game aficionado, movie connoisseur, pool shooting junkie... In other words, just an every day regular guy living an extraordinary life and working from home. Enter your name and email address in the form on the left to find out how you can too.

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