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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 little effort required 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 resources of residual income, we're going to move from the ones that we think are the toughest to create to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you have created or sold and put it on a stage that you do not run and then receive compensation based on when the merchandise is purchased or used. The majority of us do not possess the potential to quickly 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 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. However, the industry as a whole is confusing to many and demands 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. But it's considerable price and you must continuously make and cultivate content and worth. The income is residual and combines devotion and education with community.

A good book that explains this model of residual income is The automated 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 folks what you enjoy and showing them where to receive it. As a Dad, I tried 3 large 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 fantastic example of this will be Pat Flynn in PassiveIncome.com as 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 peek at a local taco stand. Sure, that taco stand might have loyal patrons and make the best damn steak taco youve ever had, but they also need my sources 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 if I go in or not. Sure, I must maintain relationships to keep earning that fee, but really the income is residual because once I sign up one client I am going to make money off of the money perpetually.

Why do we call these the Power 2 Because these demand less specialization and expertise, and with the leveraged use of debt that is smart, can operate together.

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2. Real Estate: Real estate is 2 for one reason, leverage using intelligent debt and other peoples money. When looking at real estate rents and the potential for income property supplies, it is the trifecta of residual income. To begin with, a home or rental house can appreciate, therefore capital appreciation is the first long-term benefit of owning a house.

Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, taxation protection. Rental income view it now is taxed at a lower rate than ordinary income and you also can depreciate real estate by taking a paper 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 rise, protecting your money against inflation, although your mortgage interest can be in a fixed rate potentially. .

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1. The final and most effective 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 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.