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Active income is income for which services have been performed. This includes wages, tips, salaries, 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 actions. Typically, income from interest on money that has been loaned does not count as portfolio income.

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

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you have sold or created and place it on a platform that you do not run and then get compensation based on when the merchandise is purchased or utilized. The majority of us do not possess the potential to quickly create royalty streams.

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This is the most straightforward form of passive residual income, if you can achieve 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 market solutions. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to produce 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 Places These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. However, it's considerable cost and you have to continuously create and cultivate content and worth. The income is remaining and combines loyalty and education with community.

A fantastic book that explains this model of residual income is Your Automatic Customer by John Warrillow. He walks you through, in plain English, the numerous 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 large chairs before finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, I can earn a commission.

A fantastic example of this is Pat Flynn at PassiveIncome.com as he walks you through how to set up your own system to optimize and profit from your passion.

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3. Business: As I mentioned, not all the original source businesses are created equal when it comes to residual income. Lets take a peek at a local taco stand. Surethat taco stand may have loyal patrons and 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 particular tacos.

So, literally I am going to earn a fee whether I go in or not. Sure, I have to maintain relationships to keep earning that fee, but really the income is residual because once I sign up one client I am going to make money off of their money perpetually.

Why do we call these the Electricity 2 Because these require less specialization and experience, and with all 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 supplies, it's the trifecta of residual income. First, a house or rental property can enjoy, therefore 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 that piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property 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 maybe most hidden, however important benefit is that over time rents rise, 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 effective form of residual income, in my opinion, is investing and insurance. The majority of this page us have 401Ks and IRAs, therefore that I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for several reasons: a.