An easy way to understand the difference between residual and passive income is to get your bicycle out and go for a ride on some hilly terrain.
Go ahead. We’ll wait. And don’t forget your helmet.
You’re huffing and puffing. Your legs are on fire. Finally, you see the crest of the hill. At last, you reach the top and catch your breath. The fun part’s coming, and you can’t help but grin as your bike picks up speed. All that work getting to the top paid off, and as you coast, nothing beats the rush of the wind in your face. If we can pretend that it’s literally all downhill from here, you get the idea. You did the work once – and now, you get the payoff for a long, long time. That’s residual income (sort of!).
Passive income would be like if you took that same bike ride, but on a motorized scooter. It’s not your legs pumping – it’s the little engine that’s making it go. Uphill, downhill, it’s all the same. No sweat! You just go.
Okay, park that bike for a moment so we can talk money.
So, What Are the Best Ways to Make Residual Income?
There is no shortage of options at your disposal. Some popular – and effective – methods for earning residual income include:
Build and sell an app. If you’re not super techy, this probably sounds as easy as becoming a brain surgeon to land a better job. But before you scroll past this option, wait a second. See, you don’t have to know a thing about coding or anything else technical to produce a winning app. All you need to start is a great, marketable idea that’ll solve a problem, entertain, or make everyday tasks easier for users. Then, you can hire someone to create the app for you. Once it’s ready, all it takes is some serious marketing to get your new product out there to the masses. Oh, and you can hire that out, too!
Buy (or convert) rental units. Real estate is one of the most proven and enduring investment options out there. If the start-up costs worry you, there are new avenues available that make it more affordable (like crowd-funding solutions). Anyone who’s been a landlord knows that investment real estate can be a pain in the neck, even though it can be lucrative. But if the thought of plunging clogged toilets in the middle of the night sounds like a nightmare, remember – you don’t have to do it! Not that you can leave your property to fall into ruin, of course. There are property management companies in your area that will gladly handle all the usual headaches and even collect rent and keep your property rented. Also, while you could certainly invest in single-family homes, you’ll get more bang for your buck with multi-family dwellings.
Sell other people’s products as an affiliate. If you’ve already built up an online following, you could create a residual income stream by becoming an affiliate. This entails joining up with a company and promoting their products or services. In return, you receive a commission on their sales. If you publish content on your site with affiliate products in it, publish ads on your site, or create a series of email marketing messages to send, you’ll see the beauty of doing the work once and getting paid for a long time afterward.
Create an eBook series. Independent publishing used to be a much harder path to take, compared to now. Today, many self-starting authors publish and sell on Amazon’s Kindle Market. The platform also provides tools for authors to advertise and promote books to reach a bigger audience. It takes work upfront, but once published, a book could bring in royalty payments for months or even years to come.
What Are Some Passive Income Ideas and Examples?
If you find the right source, passive income can provide you with greater financial security. Most times you’ll need to take on some risk at the onset, but even if you can’t leave your day job, having extra income can make a big difference in your life. You’ll be able to increase what you earn and make bigger strides towards your financial goals.
At the same time, even passive income channels require something on your part. The idea of passive income needing absolutely nothing to get started is not accurate, although it might be fun to dream about such a world. In reality, you’ll have to invest either time or money (or both) upfront if you’re serious about generating a sizeable revenue stream.
Some tried and true methods for generating passive income include:
High yield savings accounts Putting more of your money into a savings account is one method for creating a passive income stream. Although basic, it is a very safe avenue to take if you’re looking to keep your risk level down.
Peer to peer lending A P2P lender loans funds to applicants who might not be able to qualify for a conventional loan. Although this does carry some risk of non-payment, you have the power to select your borrowers. You could also choose to spread your funding out to protect your investment.
Invest in the stock market A go-to option for many investors, the stock market offers some level of flexibility. You can choose between investing in index funds (such as the S&P 500), or hand-picking stocks based on your specific criteria. You could also choose to invest in a retirement account, which would still serve to put your money to work.
Annuities These are insurance products that need an upfront purchase. After you buy, you’ll receive passive monthly payments into perpetuity. Annuity terms can differ from one case to the next, and they won’t always work out in your favor. Make sure to discuss options with an advisor so you know you’re making a good choice.
Business investments Investing in a business and becoming a silent partner is risky, but the potential rewards are substantial. If the business succeeds and shows growth, you’ll reap the benefits alongside your partners. But there are no guarantees, which makes it a good idea to do lots of research beforehand. You could also choose to lessen the risk by investing smaller offerings in multiple companies.
How Can I Make Passive Income Online with Minimal Risk?
Owning a cash-flowing website can produce a substantial and dependable passive income stream. Income Store partners up with aspiring site owners to help them achieve this end. With funds provided at the start, they build revenue-generating websites that bring in passive monthly income. The long-term goal is to sell the website asset for a profit that would be split down the middle. Whether you decide to sell is up to you, however.
Income Store has guaranteed minimum monthly payments written into their contracts, the amount based on your initial buy-in. Your risk is further mitigated by the fact that this is a 50-50 partnership. When you’re making money, so is Income Store. Everyone is shooting for the same goals, and when it comes to your end of the partnership, it’s completely hands-off. You only need to worry about the upfront cost at the beginning, and then the website becomes a fully passive source of income.
To enter a site ownership agreement with Income Store, you’ll need at least $100K. After your funds are received, you’ll get the date of your first payment, which Income Store will honor, even if the website isn’t ready by then. In fact, in the unlikely event of your website suffering a setback, Income Store covers all costs for replacing the asset. The nature of the partnership also ensures you are protected if anything happens to Income Store itself.
So, What’s Better: Passive Income or Residual Income?
That’s a little like asking which is better – chocolate or ice cream. Both are pretty sweet. But why choose only one? There’s nothing stopping you from earning income (either from a job or in a business you own) and investing some of it into residual and passive income streams to grow your wealth.
In fact, that’s a pretty smart idea. Rather than putting all your eggs into one basket, maybe the first investment you make should be more baskets!