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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 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're going to move from the ones which we think are the toughest to make to the ones that 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 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 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 promote solutions. On the other hand, 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 have to 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 become almost its own category. But it's considerable cost and you have to continuously create 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 Automatic Customer by John Warrillow. He walks 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 like and showing i was reading this them where to get 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 for my Amazon account, and someone buys it, I can earn a commission.

A fantastic illustration of this is Pat Flynn at PassiveIncome.com because he walks you through how to set up your own method to maximize and profit from your 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 look at a local taco stand. Sure, that taco stand may have loyal patrons and also make the best damn steak taco youve ever had, but they also have to wake up every 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 whether I move 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 from their money .

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

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

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

The fourth and possibly most hidden, but important benefit is that over time rents rise, protecting your cash-flow against inflation, while your mortgage interest can be at a fixed rate potentially. .

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1. The final and most effective type 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 side. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for several reasons: a.