As it’s been mentioned before, one income typically doesn’t cover all of the needs someone has in today’s society. So, many people decide to get a second job, side hustle, or start building passive income. If you’re looking to not work more, but still make more money, here’s what you need to know about passive residual income.
Depending on who you ask, passive income and residual income are either different or the exact same thing. Many people use the terms “residual income” and “passive income” interchangeably. But, they do have some key differences.
Passive income is earned with no effort or a one-time effort that makes money long-term. An example of this would be investing in stocks that earn dividends. Yes, you have to take the time to buy the stock, but once it’s yours, you’ll earn dividends as long as you own it.
Residual income on the other hand is money earned and saved with or without effort. In fact, you could be earning residual income without even knowing it. If you have income left at the end of the month after expenses, you are technically earning residual income.
But, passive residual income is where the real magic happens.
Earning money without having to work super hard, and being able to keep more money month to month, is what can really help a person work less, retire early, or at the very least, be financially independent!
Mixing both passive and residual income is the key to earning money month to month, while also keeping your energy input low.
So here’s how passive residual income works:
- You set up passive income that continues to pay you out month to month.
…Yep, it’s that simple. But wait, there’s a little more.
In order to make this sustainable, and make you enough money month to month, it’s helpful to have multiple streams of passive income. And, it’s equally important to make sure you don’t significantly increase your spending.
Remember, passive income and residual income are slightly different. But, by combining the two, you’ll have income month to month that will allow you to have the freedom you want.
Getting Started With Passive Residual Income
Anyone can get started earning passive income.
There are hundreds of ideas out there.
But, in order to earn that money month to month, you want to make sure that your residual income is steady or increasing over time.
If you keep spending the money you make, and don’t have net income after expenses, that passive income won’t make a huge difference.
Different Types Of Residual Income
Now that you know what passive residual income is, how do you make it?
And, how do you make sure it’s worth your initial time or money investment from you?
There are quite a few ways to earn income, and many are based on passive income.
But, there are some that are easier to get started with than others.
Here are some different types of passive residual income:
- Invest in dividend stocks – By investing in dividend stocks, you’ll earn income from those stocks at least every quarter.
- Rent out a room, space around your home, or house – With Airbnb, you won’t have to manage a rental property/properties. Instead, you can rent anything out, including just your backyard or a concrete pad! As an example, many people rent out their RVs or travel trailers when they’re not using them in order to make income on the side.
- Peer-to-Peer Lending – While this is a higher-risk investment, it can pay. Basically, peer-to-peer lending is when you lend someone money, and they pay you back with interest. There are ways to make this safer, so don’t just hand money out!
- Rent out a storage space – You can rent out an empty space in order to earn income from month to month. As an example, if you have an empty garage, car port, or barn (among other spaces), you could rent out that space as storage from month to month. It works just like those storage companies, but the money goes directly to you. Bonus points if you have climate controlled spaces.
- Rent out your car – If you don’t use your car very often, or if you have multiple cars that are collecting dust, you can rent them out and make money each month. Sites like Turo rent out your car (and insure it) and make you money, without you having to do anything else. Plus, you’ll get more use from a car you already own. Just keep in mind that this does put extra wear and tear on your vehicles.
Of course, there are plenty of other passive income options as well, but these three can get you started easily.
As you can see above, there are many ways to earn both passive and residual income. The key is to make sure that you aren’t increasing your living costs as you start earning more passive income.
A great way to make sure you don’t increase your living costs, and keep more of your money month to month, is to create a budget. From there, any extra income money you earn can be thrown into savings, investments, or as a way to start other streams of passive income each month.
Not sure how to avoid lifestyle creep?
It’s easy to get wrapped into earning extra money and wanting to spend it. But, there are ways to continue living frugally, even when you start making more money. Let the passive residual income work better for you by avoiding lifestyle creep and investing/saving all the extra you make.
Passive Residual Income: Bottom Line
As you can see, mixing passive and residual income is a great way to make money each month, and give yourself more flexibility and freedom in your day to day life.
Imagine making $500 to a full months income, just from investing and passive residual income payments!
And, the more you focus on earning both passive and residual income, the more you can take a step back when you’re financially free.
Do you currently earn passive and residual income? What are your favorite methods?
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.