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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 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 actions. Normally, 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 that we think will be the toughest to create to the ones which are the easiest to produce. Here we go.

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

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This is the purest type of passive residual income, if you can achieve it. .

6. Network Marketing: Network marketing is a unique business model and has made 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 requires a tremendous amount of mental and emotional fortitude to make residual income possible.

The effort you must 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 class. But it has considerable cost and you have to continuously make and cultivate content and worth. The income is residual 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 numerous 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 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, go to the website I can earn a commission.

A fantastic example of this is Pat Flynn in PassiveIncome.com as he walks 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 have 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 to wake up each day and turn the lights on and fire up the grill to get compensated for their particular 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 fee, but really that the income is residual because once I sign up one client I am going to earn money from their money .

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

Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, tax protection. Rental income 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 price of mileage, mortgage interest, and updates to the property.

The fourth and possibly most hidden, but important benefit is that over time rents grow, 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 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 the investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for many reasons: a.