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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 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 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 which we think are the most difficult to make to the ones which are the easiest to create. Here we go.

7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you have sold or created and put it on a stage that you do not run and then receive compensation based on when the item 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 market products. However, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to make 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 All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. But it's considerable price and you have to continuously make and cultivate content and value. The income is remaining and combines devotion and education with community.

A good book that explains this version of residual income is The automated Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription versions and the way to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell people what you enjoy and showing them where to get it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now when 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 is Pat Flynn at PassiveIncome.com because he walks through how to establish your own internet 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. Surethat taco stand may have loyal patrons and also make the best damn beef taco youve ever had, but they also have to wake up each day and turn the lights on and fire up the grill to get compensated for their particular 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 commission, but really that the income is residual because once I sign up one client I am going to make money off of the money perpetually.

Why do we call them the Electricity 2 Because these require less specialization and experience, and with the leveraged use of smart debt, 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 real estate supplies, it is the trifecta of residual income. To begin with, a home or rental house can appreciate, therefore capital appreciation is your very first long-term benefit of owning a home.

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 cost of mileage, mortgage interest, find out this here and updates to the home.

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 effective form 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 this, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for several reasons: a.