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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 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's 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 which are the easiest to produce. Here we go.

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

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This is the purest form of passive residual income, if you can achieve 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 promote products. On the other hand, the industry as a whole is confusing to many 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 worth. The income is residual and combines loyalty and education with community.

A fantastic book that explains this model of residual income is The automated Client by John Warrillow. He walks you through, in plain English, the numerous styles of subscription models 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 receive it. As a Dad, I tried 3 large seats prior to 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 in PassiveIncome.com because he walks through how to set up your own method 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 needed, but they also have to wake up each day and turn the lights on and fire up the grill to get compensated for their special tacos.

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

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

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2. Real Estate: Property is 2 for one simple reason, leverage using smart 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. First, a house or rental property can appreciate, therefore capital appreciation is your 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 newspaper 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, but important benefit is that over time rents rise, protecting your cash-flow against inflation, although your mortgage interest can be at 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. Most people have 401Ks and IRAs, so 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 several reasons: a.