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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 sources 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 produce. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've sold or created and put it on a stage that you do not run and then get compensation based on when the item is bought or used. 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 solutions. 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 must 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 class. But it has considerable price and you have to continuously make and cultivate content and value. The income is residual and combines loyalty and education with community.

A good book that explains this version of residual income is The automated Customer by John Warrillow. He walks you through, in plain English, the numerous styles of subscription versions and how to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to get it. As a Dad, I tried 3 large 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, I can earn a commission.

A great example of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish 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 may have loyal patrons and also make the best damn steak 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 special tacos.

So, literally tomorrow 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 really the income is residual because once I sign up one client I click here now am going to make money off of the money .

Why do we call them the Electricity 2 Because these require less specialization and expertise, and with all the leveraged use of smart debt, can work 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 real estate rents and the potential for income real estate provides, it is the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is the first long-term benefit of owning a home.

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 property by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and updates to the home.

The fourth and possibly most hidden, however 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 type of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore I am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for several reasons: a.