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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 very 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'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 that we think are the toughest to create to the ones that are the easiest to create. Here we go.

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

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This is the purest type 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 promote solutions. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to make 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's considerable price and you have to continuously create and cultivate content and worth. The income is residual and combines devotion and education with community.

A good book that explains this version of residual income is Your Automatic Client by John Warrillow. He walks you through, in plain English, the numerous styles of subscription models and how to potentially apply them to your read business.

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

A great illustration of this will be Pat Flynn in PassiveIncome.com as he walks through how to establish 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 have a look at a local taco stand. Sure, that taco stand may have loyal patrons and make the best damn steak 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 his explanation for their particular tacos.

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

Why do we call these the Power 2 Because these demand less specialization and expertise, 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 intelligent debt and other individuals money. When looking at real estate rents and the potential for income property supplies, it is the trifecta of residual income. First, a house or rental house can appreciate, so capital appreciation is your first long-term benefit of owning a house.

Other people are paying the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, taxation 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 home.

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 at 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, so that I am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.