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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 sources of residual income, we are going to move from the ones which we think are the most difficult to make to the ones which 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 put it on a platform that you do not run and then receive compensation based on when the item is bought or utilized. The majority of us do not have the potential to rapidly create royalty streams.

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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 market solutions. 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 possible.

The effort you have to 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. However, it has considerable cost and you have to continuously make and cultivate content and worth. The income is residual and combines devotion and education with community.

A fantastic book that explains this model of residual income is The automated Client 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 them where to get it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now if I blog about the Bumbo and link to it for 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 establish your own method to maximize 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 take a peek at a local taco stand. Surethat taco stand might have loyal patrons and make the best damn beef taco youve ever needed, 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 commission, but truly that the income is residual because once I sign up one client I am going to earn money this article from the money .

Why do we call these the Power 2 Because these require less specialization and expertise, 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 smart debt and other peoples money. When looking at real estate rents and the potential for income real estate provides, it's the trifecta of residual income. First, a home or rental house can appreciate, therefore capital appreciation is the very 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 that piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property my site by taking a paper check here deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the home.

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

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1. The final and most powerful form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, so that I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for many reasons: a.