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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 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 has been loaned does not count as portfolio income.

Now, looking at the resources of residual income, we're going to move from the ones that we think are the toughest to create to the ones which are the easiest to create. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've created or sold and put it on a platform that you do not run and then receive compensation based on when the merchandise is bought or utilized. The majority of us do not have the potential to rapidly create freshwater flows.

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This is the most straightforward form 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 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 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 Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it has considerable cost and you must continuously create and cultivate content and value. The income is remaining and combines devotion and education with community.

A good book that explains this model of residual income is Your automated Customer by John Warrillow. He walks 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 folks what great post to read you like and showing them where to get it. As a Dad, I tried 3 high chairs prior to finding the Bumbo. Now if I blog about the Bumbo and link for 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 as he walks through how to establish your own system 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 might have loyal patrons and make the best damn beef taco youve ever needed, but they also need to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.

So, literally I am going to earn a fee whether I go in or not. Sure, I have to maintain relationships to keep earning that commission, but really the income is residual because once I sign up one client I am going to make money off of their money perpetually.

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

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2. Real Estate: Property is #2 for one reason, leverage using smart debt and other peoples money. When looking at real estate rents and the potential for income real estate supplies, it is the trifecta of residual income. To begin with, a home or rental house can enjoy, therefore capital appreciation is your first long-term benefit of owning a home.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance while you own that piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate real estate 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 possibly most hidden, however important benefit is that over time rents grow, 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 effective form 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 the investment side. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for several reasons: a.