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Active income is income for which services 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 sources of residual income, we're going to move from the ones which we think are the toughest to create to the ones which are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have sold or created and put it on a stage that you do not run and then get compensation based on when the item is purchased or utilized. Most of us do not possess the potential to quickly create royalty streams.

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This is the purest 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 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. However, it's considerable cost and you must continuously make and cultivate content and worth. The income is remaining and combines devotion and education with community.

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

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

A great illustration of this is Pat Flynn in PassiveIncome.com because he walks you through how to establish your own system to optimize 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 look at a local this content taco stand. Sure, that taco stand might have loyal patrons and make the best damn beef taco youve ever needed, but they also need to wake up each 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 fee, but truly 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 Electricity 2 Because these demand less specialization and expertise, and together with the leveraged use of smart debt, can operate together.

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2. Real Estate: Real estate is 2 for one simple reason, leverage using intelligent debt and other peoples money. When looking at property rents and the potential for income property provides, it's the trifecta of residual income. To begin with, a house or rental house can enjoy, so capital appreciation is the first long-term benefit of owning a home.

Other people 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 newspaper deduction on your annual tax return 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 money against inflation, although your mortgage interest can be in a fixed rate potentially. .

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1. The final and most effective type of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore I am going to leave that for the investment side. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for many reasons: a.