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Active income is income for which solutions 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 received on a regular basis, with very 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 actions. 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 are going to move in the ones which we think will be the toughest to make to the ones that are the easiest to produce. Here we go.

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

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This is the purest 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 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 potential.

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

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

A fantastic book that explains this version of residual income is The Automatic Client 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 like and showing them where to receive it. As a Dad, I tried 3 high chairs prior to Find Out More finding the Bumbo. Now if I blog about the Bumbo and link to it to my Amazon account, and someone buys it, then I can earn a commission.

A great illustration of this will be Pat Flynn in 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 have a peek at a local taco stand. Sure, that taco stand might have loyal patrons and make the best damn beef taco youve ever had, but they also need to wake up every day and turn the lights on and fire up the grill to get compensated for their particular tacos.

So, literally tomorrow 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 earn money off of the money perpetually.

Why do we call them the Electricity 2 Because these demand 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 intelligent debt and other peoples money. When looking at property rents and the potential for income property supplies, it is the trifecta of residual income. First, a house or rental property can enjoy, so capital appreciation is the 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 this piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the price 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 effective form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore I am going to leave that for the investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most powerful tool for many reasons: a.

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