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Active income is income for which services have been performed. This includes wages, tips, wages, commissions, and income from businesses in which there is material participation. Passive or Residual income is an income obtained on a regular basis, with very little effort needed to maintain it.

Portfolio income is income from investments, dividends, interest, royalties and capital gains. Portfolio income does not come from passive investments and is not earned through normal business activity. Typically, income from interest on money that's been loaned does not count as portfolio income.

Now, looking at the sources of residual income, we're going to move in the ones that we think are the most difficult to make to the ones which are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have sold or created and put it on a stage that you do not run and then get compensation based on when the merchandise is purchased or used. Most of us do not have the potential to rapidly create royalty streams.

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This is the purest type of passive residual income, if you can achieve it. .

6. Network Marketing: Network marketing is a unique business model and has created more millionaires than any other business. The industry as a whole is growing and more companies are trying to leverage referrals or direct sales to increase revenue and market solutions. However, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to make residual income possible.

The effort you have to put in is important to consider. .

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5. Subscription Models: Subscription models/Customer Hubs/Member Places These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it has considerable price and you must continuously create and cultivate content and worth. The income is remaining and combines devotion and education with community.

A good book that explains this model of residual income is The Automatic Client by John Warrillow. He walks through, in plain English, the various styles of subscription versions and how to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to receive it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now if I blog about see the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.

A fantastic example of this will be Pat Flynn in PassiveIncome.com as he walks you through how to set up your own system to maximize and profit from the passion.

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3. Business: As I mentioned, not all businesses are created equal when it comes to residual income. Lets have a look at a local taco stand. Sure, that taco stand may have loyal patrons and also make the best damn steak taco youve ever had, but they also need to wake up each day and turn the lights on and fire up the grill to get paid for their special tacos.

So, literally I am going to earn a fee if I move in or not. Sure, I must maintain relationships to keep earning that fee, but truly that the income is residual because once I sign up one client I am going to make money from the money .

Why do we call them the Electricity 2 Because these require less specialization and experience, and together with all the leveraged use of debt that is smart, can operate together.

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2. Real Estate: Real estate is #2 for one reason, leverage using intelligent debt and other individuals money. When looking at property rents and the potential for income get more property provides, it's the trifecta of residual income. To begin with, a house or rental house can appreciate, so capital appreciation is the very first long-term benefit of owning a home.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time you own that piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a newspaper deduction on your annual tax return not to mention reference expensing the price of mileage, mortgage interest, and updates to the property.

The fourth and possibly most hidden, but important benefit is that over time rents grow, protecting your cash-flow against inflation, while your mortgage interest can be in a fixed rate potentially. .

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1. The final and most powerful form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so I am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for several reasons: a.