Residual Income vs Passive Income: The difference

• Passive income is money earned from an enterprise that has little or no ongoing effort involved.
• Residual income is a calculation that determines how much discretionary money is available after financial obligations have been met.

What is passive income and what is residual income? The difference between residual and passive income depends on the industry in which these terms are being discussed.  In an online bussiness environment, the two terms are used interchangeably. In this environment, the terms typically mean a source of income that is automated. Residual income is income you receive after doing initial work or can be passive income that is being generated online. For example, Jane owns and operates her own yoga blog. On the blog, she sells yoga mats and apparel. Jane doesn’t have to actively try to make individual sales. The sales come in passively via the visitors who arrive at her blog.

In a financial environment, residual income is the money that a person has leftover after their expenses are covered each month. Passive income, however, still has the same definition in a financial environment that it does in an online business environment

Passive Income

passive income is earned with little or no effort, and it’s often earned by individuals and companies on a regular basis like an investment or peer-to-peer (P2P) lending. The internal revenue service (IRS) distinguishes it from earned income as money earned from an entity with which you have no direct involvement. Remember, earned income is anything you actually work for such as wages, salaries, tips, commissions, and bonuses. But with passive income, you may be an investor or silent partner—not the person heading up the enterprise.

Residual Income

 residual income is a form of passive income as entities may earn it without any effort. But it may mean different things depending on the context, whether that’s in the world of personal finance, corporate finance, or equity valuation. Here’s a brief look at how each area looks at this kind of income.