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Active income is income for which solutions 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 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 resources of residual income, we are going to move from the ones that we think will be the toughest to create to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have sold or created and put it on a stage 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 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 most and requires 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 Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it's considerable price and you must continuously create and cultivate content and value. The income is residual and combines loyalty and education with community.

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

4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to receive it. As a Dad, I tried 3 high seats before finding the Bumbo. Now when I blog about the Bumbo and link to it to my Amazon account, and someone buys it, 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 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 look at a local taco stand. Surethat taco stand might have loyal patrons and also make the best damn steak 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 special 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 really that the income is residual because once I sign up one client I am going to make money off of their money .

Why do we call these the Electricity 2 Because these require less specialization and experience, and together with all 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 smart debt and other individuals money. When looking at real estate rents and the potential for income real estate provides, it is the trifecta of residual income. First, a home or rental property can appreciate, therefore capital appreciation is the first long-term benefit of owning a home.

Other people are paying off the mortgage, insurance, property taxes and maintenance at the same time you own this piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also 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 home.

The fourth and possibly most hidden, however important benefit is that over time rents grow, protecting your money against inflation, although 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. Most people have 401Ks and IRAs, therefore that I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, my site safest and most powerful tool for several reasons: a.