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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 actions. 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 from the ones which we think will be the toughest to make to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand 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 purchased or utilized. The majority of us do not have the potential to quickly 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 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 solutions. On the other hand, the industry as a whole is confusing to many and demands 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. However, it has considerable cost and you must continuously make and cultivate content and worth. The income is residual and combines devotion 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 how 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 high seats before finding the Bumbo. Now when I blog about the Bumbo and link to it to my Amazon account, and someone buys it, I can earn a commission.

A fantastic illustration of this is Pat Flynn in PassiveIncome.com because he walks you 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 look at a local taco stand. Surethat taco stand may have loyal patrons and make the best damn steak 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 particular tacos.

So, literally tomorrow I am going to earn a fee whether I move in or not. Sure, I have to 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 demand less specialization and expertise, and 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 property provides, it's the trifecta of residual income. First, a house or rental house can appreciate, therefore capital appreciation is the first long-term benefit of owning a house.

Other people are paying the mortgage, insurance, property taxes and maintenance at the same time you own that piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate real estate by taking a paper deduction on your annual tax return click here to read not to mention expensing the price of mileage, mortgage interest, and updates to the property.

The fourth and maybe most hidden, however important benefit is that over time rents rise, 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 I am going to leave that for the investment side. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for several reasons: a.