When it comes to making money and earning an income, as with most things I think it is important that you first try to educate yourself about your options and what they really mean. For most people when they think income they think of linear types of income such as say getting a job or selling belongings. A working professional would usually fall into a linear income category too as in these cases you have to continually work in order to get paid. It usually stops there for most people as those are the only ways that they have been taught in terms of how to generate money. When you tell them there are different types of income they just give you a blank stare.
Residual income is in my opinion an important factor for one’s long term financial success. Residual income is basically being able to earn money from some type of work or investment that you have done once and still continually get paid for it. A quick example would be say an actor who stars on a popular sitcom where he/she gets paid a certain amount to work on one episode. On top of this, whenever a rerun of that same episode occurs the actor will continually be compensated for that as well which would be residual income.
Another way to plant the idea of residual income is to think of all of the things that you continuously pay for and how companies make money off you with that one time effort. I’m pretty positive that most people reading this have subscribed to some kind of Internet access service to do so. You can consider yourself as residual income for your provider as they did the work once to attract you in using its service and now you pay them every month for its service.
Passive income is a little trickier as many people describe it as almost exactly the same thing as residual income. I personally describe passive income as where you continually generate money from a source/investment which does not require direct involvement from yourself. So an example could be say a business that I initially started and now that I have all of the necessary talent and structure in place the business is self functional where I don’t even have to be there for it to continually expand into new areas and generate revenue. As you can tell, a passive income is usually the more difficult type of income to establish.
There are probably a bunch of different definitions for of all of these depending on who you talk to, but I think the important thing is to recognize that there are different types of income and the more you educate and understand it in general the better you’ll be in recognizing the different opportunities that are out there.