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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 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 in the ones that we think will be 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, machinesand 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 item is purchased or utilized. Most of us do not possess the potential to rapidly create freshwater flows.

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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 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 Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. However, it's considerable cost and you must continuously create and cultivate content and worth. The income is residual and combines devotion and education with community.

A good book that explains this version of residual income is The automated Customer by John Warrillow. He walks 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 folks what you like and showing 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 to it for my Amazon account, and someone buys it, I can earn a commission.

A great illustration of this will be Pat Flynn in PassiveIncome.com as he walks through how to establish your own system to optimize 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. Sure, that taco stand may have loyal patrons and also make the best damn beef about his taco youve ever had, but they also have to wake up each day and turn the lights on and fire up the grill to get paid for their special tacos.

So, literally 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 more going to earn money from the money perpetually.

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

Other people are paying 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 home.

The fourth and possibly most hidden, however important benefit is that over time rents rise, protecting your money against inflation, while your mortgage interest can be in 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. Most people 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 by far the simplest, safest and most effective tool for several reasons: a.