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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 received on a regular basis, with very 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's been loaned does not count as portfolio income.

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

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you have sold or created and put it on a stage that you do not run and then receive compensation based on when the item is purchased or used. The majority of us do not have the potential to rapidly 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 products. 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. However, it has considerable cost and you have to 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 automated Customer by John Warrillow. He walks through, in plain English, the numerous 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 receive it. As a Dad, I tried 3 large seats prior to finding the Bumbo. Now when I blog about the Bumbo check over here and link to it for my Amazon account, and someone buys it, then I can earn a commission.

A great example of this will be Pat Flynn in PassiveIncome.com as he walks you through how to establish your own system 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 peek at a local taco stand. Sure, that taco stand might have loyal patrons and make the best damn beef 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 compensated for their special tacos.

So, literally tomorrow I am going to earn a fee whether I move in or not. Sure, I must maintain relationships to keep earning that commission, but truly the income is residual because once I sign up one client I am going to make money off of their money .

Why do we call them the Electricity 2 Because these require less specialization and experience, and with the leveraged use of debt that is smart, can work together.

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2. Real Estate: Real estate is 2 for one reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income real estate supplies, it's the trifecta of residual income. To begin with, a home or rental property can enjoy, therefore capital appreciation is the first long-term 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, 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 cost of mileage, mortgage interest, and upgrades to the property.

The fourth and possibly most hidden, however important benefit is that over time rents rise, protecting your money against inflation, although your mortgage interest can be at 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 I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for several reasons: a.