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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 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 activity. Normally, income from interest on money that's been loaned does not count as portfolio income.

Now, looking at the sources of residual income, we are going to move from the ones which we think are the toughest to make 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 sold or created and put it on a platform that you do not run and then get compensation based on when the item is purchased or utilized. The majority of us do not possess the potential to rapidly 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 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 products. 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 potential.

The effort you have to put in is important to consider. .

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5. Subscription Models: Subscription models/Customer Hubs/Member Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. But it's considerable cost and you must continuously create and cultivate content and worth. The income is residual and combines loyalty and education with community.

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

4. Affiliate look at here now marketing: Getting paid to tell people what you enjoy and showing them where to receive it. As a Dad, I tried 3 large chairs before 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 example of this is Pat Flynn in PassiveIncome.com as he walks through how to set up your own method 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 take a peek at a local taco stand. Sure, that taco stand might have loyal patrons and make the best damn steak taco youve ever had, but they also need to wake up every 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 go in or not. Sure, I have to 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 from the money .

Why do we call them the Electricity 2 Because these demand less specialization and experience, and 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 simple reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income property provides, it is the trifecta of residual income. To begin with, a home blog or rental property 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 this piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the property.

The fourth and maybe most hidden, but important benefit is that over time rents rise, protecting your cash-flow against inflation, although your mortgage interest can be at a fixed rate potentially. .

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1. The final and most effective form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore that I am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for several reasons: a.