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

Now, looking at the sources of residual income, we are going to move from the ones that we think are the toughest to make to the ones which are the easiest to produce. Here we go.

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

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This is the most straightforward type of passive residual income, if you can achieve 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 solutions. However, the industry as a whole is confusing to most 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it's considerable price and you have to continuously create and cultivate content and value. The income is residual and combines loyalty and education with community.

A fantastic book that explains this version of residual income is Your automated Client by John Warrillow. He walks you through, Full Article in plain English, the various styles of subscription models and the way to potentially apply them to your 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 prior to finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, I can earn a commission.

A fantastic illustration of this is Pat Flynn at PassiveIncome.com because he walks through how to set up your own system to maximize 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 look at a local taco stand. Sure, that taco stand may have loyal patrons and make the best damn beef taco youve ever had, but they also have to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.

So, literally tomorrow I am going to earn a fee whether I go in or not. Sure, I must 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 the money perpetually.

Why do we call them 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 peoples money. When looking at real estate rents and the potential for income real estate provides, it's the trifecta of residual income. To begin with, a home or rental property can appreciate, so capital appreciation is your very 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 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 grow, protecting your cash-flow against inflation, although 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. Most people have 401Ks and IRAs, so I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for several reasons: a.