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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 little effort required 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. Normally, income from interest on money that has been loaned does not count as portfolio income.

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

7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you've 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 utilized. Most of us do not have the potential to quickly create freshwater flows.

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This is the most straightforward form of passive residual income, if you can attain it. .

6. Network Marketing: Network marketing is a unique business model and has made 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 promote products. On the other hand, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to produce residual income potential.

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

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5. Subscription Models: Subscription models/Customer Hubs/Member Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it has considerable price and you have to continuously create and cultivate content and value. The income is remaining and combines devotion and education with community.

A fantastic 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 people what you enjoy and showing them where to receive it. As a Dad, I tried 3 high seats before finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.

A great illustration of this will be Pat Flynn at PassiveIncome.com because he walks through how to establish 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 take a look at a local taco stand. Sure, that taco stand might have loyal patrons and also make the best damn beef taco youve ever needed, but they also have 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 have to maintain relationships to keep earning that commission, but truly the income is residual because once I sign up one client I am going to make money from their money .

Why do we call these the his explanation Electricity 2 Because these require less specialization and experience, and with the leveraged use of smart debt, can work together.

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2. Real Estate: Real estate is #2 for one reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income real estate provides, it's the trifecta of residual income. First, a home or rental house can enjoy, therefore capital appreciation is your first long-term benefit of owning a house.

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

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

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1. The final and most powerful type of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, so I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for many reasons: a.