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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 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'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 most difficult to make to the ones which are the easiest to create. Here we go.

7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you've created or sold and place 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 possess the potential to quickly create freshwater flows.

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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 products. On the other hand, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to produce residual income potential.

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 come to be almost its own category. However, it's considerable price and you must 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 The automated Client by John Warrillow. He walks 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 people what you enjoy and showing them where to get it. As a Dad, I tried 3 large seats before finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then helpful resources I can earn a commission.

A great example of this will be Pat Flynn in PassiveIncome.com as he walks you through how to establish your own method 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 steak taco youve ever had, but they also need to wake up every day and turn the lights on and fire up the grill to get compensated for their particular 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 commission, but really the income is residual because once I sign up one client I am going to make money from the money .

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

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

Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time you own this piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate real estate by taking a paper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the home.

The fourth and possibly most hidden, but important benefit is that over time rents grow, protecting your cash-flow against inflation, while your mortgage interest can be at a fixed rate potentially. .

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1. The final and most powerful 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 the investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.