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Active income is income for which solutions 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 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's been loaned does not count as portfolio income.

Now, looking at the resources of residual income, we are going to move in 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 music, 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 get compensation based on when the merchandise 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 type of passive residual income, if you can achieve 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 products. On the other hand, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to produce 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 All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it has considerable cost and you have to continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.

A good book that explains this version of residual income is The automated Client by John Warrillow. He walks through, in plain English, the numerous styles of subscription models 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 high chairs dig this prior to finding the Bumbo. Now when I blog about the Bumbo and link to it for my Amazon account, and someone buys it, then I can earn a commission.

A great illustration of this is Pat Flynn in PassiveIncome.com because he walks you through how to set up your own method to optimize 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. Surethat taco stand may have loyal patrons and also 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 compensated for their special tacos.

So, literally I am going to earn a fee whether 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 make money from their money .

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

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2. Real Estate: Real estate is #2 for one reason, leverage using intelligent debt and other individuals 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, therefore capital appreciation is your very first long-term benefit of owning a house.

Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property by taking a newspaper deduction on your annual tax return not to mention expensing the price 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, 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 that I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for many reasons: a.