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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 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's been loaned does not count as portfolio income.

Now, looking at the sources of residual income, we are going to move in the ones that we think are the toughest 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 sold or created and put it on a platform that you do not run and then receive compensation based on when the merchandise is bought or utilized. Most of us do not possess the potential to quickly create royalty streams.

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This is the most straightforward 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 market solutions. On the other hand, the industry as a whole is confusing to most 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 All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. But it's considerable price and you have to continuously make and cultivate content and value. The income is remaining and combines loyalty and education with community.

A fantastic book that explains this version of residual income is The automated Customer by John Warrillow. He walks through, in plain English, the numerous styles of subscription versions 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 get it. As a Dad, I tried 3 high seats before finding the Bumbo. Now when I blog about the Bumbo and link for it for my Amazon account, and someone buys it, then I can earn a commission.

A great example of this is Pat Flynn in PassiveIncome.com because he walks you through how to establish your own system 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. 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 paid for their particular tacos.

So, literally I am going to earn a fee if I move in or not. Sure, I must maintain relationships to keep earning that fee, but truly that the income is residual because once I sign up one client I am going to make money from their money perpetually.

Why do we call these the Electricity 2 Because these require 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 page is 2 for one reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income real estate supplies, it is the trifecta of residual income. To begin with, a home or rental property can enjoy, so capital appreciation is your first long-term benefit of owning a house.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, tax protection. home Rental income is taxed at a lower rate than ordinary income and you also can depreciate real estate by taking a newspaper deduction on your annual tax return not to mention expensing the cost 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 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. Most people have 401Ks and IRAs, so that I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for many reasons: a.