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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 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 resources of residual income, we are going to move in the ones that we think will be the toughest to make to the ones that are the easiest to produce. Here we go.

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

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This is the most straightforward form of passive residual income, if you can attain 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 products. However, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to make 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 Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. However, it's considerable price and you have to continuously make and cultivate content and worth. The income is remaining and combines devotion and education with community.

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

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

A fantastic illustration of this will be Pat Flynn in PassiveIncome.com as he walks through how to establish your own system 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 look at a local taco stand. Sure, that taco stand might have loyal patrons and also make the best damn beef taco youve ever needed, but they also have to wake up each day and turn the lights on and fire up the grill to get compensated for their special tacos.

So, literally tomorrow I am going to earn a fee if I move in or not. Sure, I have to maintain relationships to keep earning that fee, but truly 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 Electricity 2 Because these demand less specialization and experience, 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 reason, leverage using smart debt and other individuals money. When looking at real estate rents and the potential for income property provides, it is the trifecta of residual income. To begin with, a house or rental property can appreciate, therefore capital appreciation is the very first long-term benefit of owning a house.

Other people are paying off the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary Resources 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 upgrades to the property.

The fourth and possibly most hidden, but important benefit is that over time rents grow, 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 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 the investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for many reasons: a.