How does residual income differ from passive income?

Residual income and passive income are often confused, but they have distinct differences. Residual income refers to the earnings that continue to flow after the initial effort has been made. This type of income is typically associated with ongoing work or investment, such as royalties from a book or income from rental properties. On the other hand, passive income is generated with minimal effort to maintain. Examples include dividends from stocks or interest from savings accounts. To clarify, residual income is the money earned after the initial work has been completed, often requiring some level of ongoing involvement. In contrast, passive income is earned with little to no active participation once the initial setup is done. Both types of income can provide financial stability, but they differ in the level of effort required to sustain them.