What Is Residual or Passive Income? I am sure a lot of people have heard of the term residual income or passive income but not sure what it means. Or you might know what it means superficially but do not understand the real power behind residual income.

According to New York Times Best Seller, Robert Kiyosaki, there are 3 types of income.

1. Earned Income – Income you earn for having a job, or in another word, your salary.
2. Portfolio Income – Income you earn from your paper asset or capital gain
3. Passive Income or Residual Income – Income you get on regular basis regardless if you work or not

Residual income is what offers us financial and time freedom. You can go travel around the world or spend time with people you care about, and not doing any work but you still get the money sent to you month after month.

What Is Residual or Passive Income?

As I said earlier, residual income is the income you get month after month without you having to put in the effort. A few examples of residual income below:

Rental Income – You own a house and rent it to a tenant. Your tenant pays you rent every month as long as he or she stays in the house.

Bank Interest – You have a large amount of money in the bank and the bank pays you interest every month.

Business Income – You built a large business which is able to function without your presence. You get income from the business every month or every year.

This is different from other incomes which you have to sacrifice your time and effort all the time to earn the money.

The Power of Residual Income

The best way of earning residual income is via network marketing. This is the only way you can build a large business without large investment initially. Everyone who has the determination and drive is able to make it work. It doesn’t matter where you are from, what is your education level, what  is your religion or ethnic background.

Let me ask you, if a person (A) has a job and he is earning $5000 a month of salary every month. Another person (B) built a network marketing business and he is making $3000 a month in residual income a month. Who is richer? Who is in better financial position? Someone who does not understand residual income will say person A because he makes more money. However, if you look closer, person A is paid $5000 a month for working the month before. If he leaves the job because he gets sick or he wants to spend some time doing his own thing, his income will stop right away. On the other hand, person B can stop working, go travel around the world for months and he will still get $3000 a month. Now think about it… do you rather be person A or B?

Do you know that to earn $3000 of interest from the bank every month, you need to have $1.2 million dollars in the bank earning 3% interest per annum. This means person B’s business has a value of $1.2 millions dollar!!!

Do you still think person A is better off than person B?

 What Is Residual or Passive Income? I hope by now you have full understanding of it and are able to explain it to someone else. It is really the most powerful type of income.