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There are so many trendy phrases on-line, as well as jargon that is too technical for the average user, that sometimes it is hard to decipher it all. Even with something so easy as passive income and residual income. Web page upon web page is using the two terms interchangeably and that is wrong. There is a slight, but significant, difference between the two.

Let us begin by going to the most basic difference, the definitions of both.

Passive Income - Income that is earned through investments, real estate or certain internet ventures. Once the initial investment has been made (whether it be in time or monetarily), the individual does not have to be actively involved after that to make money. View yourself being passive and what do you see? Someone sitting, being lazy and inactive! That is just how passive income works. You don't have to do anything to make the money you receive.

Residual Income - Payments made to an individual based on a specific time table after a sale. The amount of each payment is normally a pre-agreed upon amount. Although not an on-line example, royalties are considered to be residual income. Whether the person is a writer, an actor or an illustrator, these people get paid for works that get sold and re-sold and placed into syndication.

When you look at these definitions, you can see that residual income can be called passive income under most conditions, but the reverse is never the case. Once you have put significant work into making the money, you are looking at residual income that will turn passive with time.

So, when you are looking at making money on-line, there are some methods that are 'passive' and some that are 'residual'. Let us take a look at some from each category.

Passive Income Methods:

1. Search Engine Optimization, also known by the acronym SEO, is a passive way to get income. When a search engine ranks you in the top 10, you will get targeted Internet traffic to your site. Whether you are selling products, a service, or just information, you can get passive income just by getting those people to your site once it has been created.

2. Pay Per Click advertising, or PPC advertising, is a passive way to get income. Although you must invest in the advertising, these targeted ads draw business to your site. Once that has been set up with a PPC advertising service, no time or effort is required on your part.

Once these methods of making money are in place, you sit back and have no further investment of time or money ahead of you. You simply enjoy the income.

Residual Income Methods:

1. Selling anything on-line, whether it is a good or service, where the fee is automatically renewed every so often is a residual way to make income.

2. Network marketing which requires you to go out and get customers or find representatives to get customers, from which you earn commissions every month is a residual way to make income.

Affiliate programs fall somewhere between the two. Sometimes they will take very little effort on your part, even from the start, so can be considered passive. However, there are times when a great amount of effort is put forth on your part and payments will be made in such a way that they would be considered residual.

No matter which road you choose, both passive and residual income are great ways to supplement your income or raise the level of your lifestyle. With research, practice, and a little bit of good luck, you can make a good amount of money with either.