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Active income is income for which services have been performed. This includes wages, tips, wages, commissions, and income from businesses in which there is material participation. Passive or Residual income is an income received on a regular basis, with 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 are going to move in the ones which we think are the most difficult to create to the ones which are the easiest to create. Here we go.

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

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This is the purest type of passive residual income, if you can achieve 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 products. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to make 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 Places These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. But it's considerable cost and you must 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 Automatic Client by John Warrillow. He walks you through, in plain English, the various styles of subscription versions and how 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 large chairs 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 example of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish your own system to optimize 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 take 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 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 I am going to earn a fee whether I go in or not. Sure, I must 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 make money from the money .

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

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

Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own that piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property by taking a paper 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, however 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 useful source most effective form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore that I am going to leave that for the investment side. Within this, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most powerful tool for several reasons: a.