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Active income is income for which solutions 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. Typically, income from interest on money that has been loaned does not count as portfolio income.

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

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

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This is the purest type of passive residual income, if you can attain 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. On the other hand, the industry as a whole is confusing to many and requires a tremendous amount of mental and emotional fortitude to make residual income possible.

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

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5. Subscription Models: Subscription models/Customer Hubs/Member Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it's considerable cost and you must continuously make and cultivate content and value. The income is residual and combines devotion and education with community.

A fantastic book that explains this model of residual income is Your automated Customer by John Warrillow. He walks you through, in plain English, the numerous styles of subscription models 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 get it. As a Dad, I tried 3 high seats before finding the Bumbo. Now if 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 example of this will be Pat Flynn at PassiveIncome.com as he walks through how to establish your own system to optimize 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 peek at a local taco stand. Sure, that taco stand may have loyal patrons and make the best damn beef taco youve ever needed, but they also have to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.

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

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

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

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

The fourth and possibly most hidden, but important benefit is that over time rents grow, 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 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 this, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for several reasons: a.