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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 needed 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 has been loaned does not count as portfolio income.

Now, looking at the resources of residual income, we're going to move in the ones that we think are the most difficult to create to the ones that 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 place it on a platform that you do not run and then get compensation based on when the item is purchased or utilized. Most of us do not have the potential to rapidly create freshwater flows.

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This is the most straightforward 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 solutions. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to produce residual income possible.

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 category. However, it has 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 version of residual income is The automated Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription models and how to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell people what you like and showing them where to get it. As a Dad, I tried 3 large chairs before finding the Bumbo. Now when I blog about the Bumbo and link for it to 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 through how to set up your own system 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. Sure, that taco stand may have loyal patrons and also make the best damn steak taco youve ever had, but they also have to wake up every day and turn the lights on and fire up the grill to get compensated for their particular tacos.

So, literally I am going to earn a fee if I move in or not. Sure, I must 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 make money from their money perpetually.

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

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2. Real Estate: Property is #2 for one simple reason, leverage using smart debt and other individuals money. When looking at property rents and the potential for income property supplies, it's the trifecta of residual income. First, a home or rental property can appreciate, therefore capital appreciation is your very first long-term benefit of owning a house.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time you own that piece of real estate. 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 not to mention expensing the cost of mileage, mortgage interest, and updates to the property.

The fourth and maybe most hidden, but important benefit is that over time rents rise, protecting your cash-flow against inflation, while link your mortgage interest can be at 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 Extra resources investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for many reasons: a.