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Some of the most popular include investing in dividend-paying stocks, depositing money in interest-bearing accounts and investing in residential real estate. Passive income can come from many sources. People can cut costs to boost residual income by reducing entertainment subscriptions such as cable television, paying off a high-interest credit card, shopping for better rates or insurance or moving to a less costly home, perhaps in a different area. Reducing expenses can effectively increase residual income even if overall income doesn’t change or even declines modestly. Residual income can also be increased by generating passive income, such as by investing in dividend-paying stocks. To increase income, a wage-earner may request a raise from the employer, take a second job or sell unused assets such as excess furnishings. Increasing residual income involves either increasing overall income, reducing expenses or both. It can come from wages and salary from working at a job, passive income from dividends or savings or any other source.

Unlike passive income, the source of residual income doesn’t matter. If nothing else, having money left over at the end of the month supplies peace of mind. Residual income can also let someone pay down high-interest debts, build emergency savings or start investing. Having a healthy level of residual income is important when seeking credit since lenders want reassurance that a borrower has enough disposable income to make the loan payment. Passive income can also come from royalties paid to an author, tuition fees charged to people who take an online course and interest in an I.O.U. Common sources of passive income include interest from savings accounts or bonds, dividends from stocks and rental income from real estate. Passive income is money earned without active involvement by the investor or owner of that money. You can speak to a financial advisor about how residual and passive income can play a role in your finances. Reducing living expenses or finding ways to create additional earned income can also boost residual income. Generating passive income can increase the amount of an individual’s residual income. Passive income is money earned without significant ongoing active effort while residual income refers to the funds an individual has left after living expenses have been covered. Passive income and residual income are two types of personal revenue that separately or together can have a sizable effect on an individual’s financial comfort and ability to reach financial goals.