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Active income is income for which solutions 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 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. Normally, 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 which we think are the toughest to make to the ones which are the easiest to create. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've sold or created and put it on a stage that you do not run and then get compensation based on when the merchandise is purchased or used. The majority of us do not have the potential to quickly create royalty streams.

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This is the most straightforward form of passive residual income, if you can attain 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. 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 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 class. But it's considerable price and you must continuously create and cultivate content and value. The income is remaining and combines loyalty and education with community.

A good book that explains this model of residual income is The Automatic Customer by John Warrillow. He walks through, in plain English, the numerous 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 official statement them where to get it. As a Dad, I tried 3 large chairs 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 fantastic example of this is Pat Flynn in PassiveIncome.com as he walks you through how to establish your own method to optimize and profit from your 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 make the best damn beef taco youve ever had, but they also have 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 if I go in or not. Sure, I have to maintain relationships to keep earning that fee, but really that the income is residual because once I sign up one client I am going to earn money off of the money perpetually.

Why do we call these the Electricity 2 Because these demand 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 intelligent debt and other individuals money. When looking at real estate rents and the potential for income real estate supplies, it is the trifecta of residual income. To begin with, a home or rental house can enjoy, 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 while you own that piece of property. Third, tax protection. 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 price of mileage, mortgage interest, and upgrades to the home.

The fourth and maybe most hidden, however important benefit is that over time rents grow, 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 powerful form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for many reasons: a.