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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 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 sources of residual income, we're going to move from the ones which we think will be the most difficult to create to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you have created or sold and put it on a platform that you do not run and then get compensation based on when the item is bought or used. Most of us do not have 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 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 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 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 Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it has considerable price and you must 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 Your Automatic Client 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 people what you enjoy and showing them where to get it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now if I blog about the Bumbo and link for it to my Amazon account, and someone buys it, I can earn a commission.

A fantastic example of this is Pat Flynn in PassiveIncome.com as original site he walks through how to establish 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 have 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 need to wake up every 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 whether I move in or not. Sure, I must maintain relationships to keep earning that commission, but really the income is residual because once I sign up one client I am going to make money off of their money perpetually.

Why do we call them the Power 2 Because these require less specialization and expertise, 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 reason, leverage using smart debt and other individuals money. When looking at real estate rents and the potential for income property supplies, it's the trifecta of residual income. First, a house or rental house can enjoy, therefore capital appreciation is the first long-term benefit of owning a home.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance while 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 paper deduction on your annual tax return not to mention expensing the price Go Here of mileage, mortgage interest, and updates to the property.

The fourth and maybe most hidden, but important benefit is that over time rents grow, protecting your cash-flow against inflation, while your mortgage interest can be in a fixed rate potentially. .

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1. The final and most powerful 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 that, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for many reasons: a.

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