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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 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 are going to move from the ones which 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 audio, books, inventions, machinesand 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 used. The majority of us do not have the potential to quickly create royalty streams.

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This is the purest form 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 market solutions. On the other hand, the industry as a whole is confusing to many 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it's considerable cost and you must continuously make and cultivate content and value. The income is residual and combines devotion and education with community.

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

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

A fantastic example of this will be Pat Flynn in PassiveIncome.com as he walks through how to set up your own method 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 take a peek at a local taco stand. Sure, that taco stand may have loyal patrons and also make the best damn beef 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 special 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 the income is residual because once I sign up one client I am going to earn money off of the money .

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

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

Other people are paying off the mortgage, insurance, property taxes and maintenance while you own this piece of property. 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 cost of mileage, mortgage interest, and updates to the property.

The fourth and possibly most hidden, but 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. The majority of us have 401Ks and IRAs, so I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most look at here powerful tool for many reasons: a.