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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 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 resources of residual income, we're going to move in the ones which we think will be the most difficult to make to the ones which are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you've sold or created and place it on a platform that you do not run and then receive compensation based on when the item is purchased or used. Most of us do not possess the potential to quickly create royalty streams.

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This is the purest type 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. 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 possible.

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 come to be almost its own category. However, 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 Your automated Customer by John Warrillow. He walks you 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 people what you enjoy and showing them where to get it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then 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 the 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 may have loyal patrons and also make the best damn steak taco youve ever needed, but they also have to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.

So, literally I am going to earn a fee if I move in or not. Sure, I have to maintain relationships to keep earning that commission, but truly 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 Power 2 Because these require less specialization and expertise, and together with all the leveraged use of debt that is smart, can operate together.

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2. Real Estate: Real estate is #2 for one reason, leverage using intelligent directory debt and other peoples money. When looking at real estate rents and the potential for income real estate supplies, it is the trifecta of residual income. First, a house or rental house can appreciate, so capital appreciation is your 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 home.

The fourth and maybe 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 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 your investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for several reasons: a.