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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 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 are going to move in the ones that we think are the most difficult to make to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have created or sold and place it on a platform that you do not run and then receive compensation based on when the item is bought or utilized. Most of us do not have the potential to rapidly create freshwater flows.

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This is the most straightforward form 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 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. But it has considerable cost and you have to continuously create and cultivate content and worth. The income is remaining and combines loyalty and education with community.

A good book that explains this model of residual income is Your Automatic Client by John Warrillow. He walks through, in plain English, the various styles of subscription versions and the way to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to get it. As a Dad, I tried 3 large chairs before finding the Bumbo. Now if I blog about the Bumbo and link for it for my Amazon account, and someone buys it, I can earn a commission.

A fantastic example of this is Pat Flynn at PassiveIncome.com as he walks through how to establish your own method to maximize 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. Sure, that taco stand may 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 tomorrow I am going to earn a fee if I go 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 earn money off of their money .

Why do we call these the Power 2 Because these require less specialization and experience, and together with all the leveraged use of smart debt, can operate together.

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2. Real Estate: Property is #2 for one simple reason, leverage using intelligent 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 click to investigate benefit of owning a house.

Other people are paying off the mortgage, insurance, property taxes and maintenance while you own that piece of property. Third, taxation 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 of mileage, mortgage interest, and updates to the property.

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 a fantastic read insurance. The majority of us have 401Ks and IRAs, therefore that I am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for many reasons: a.