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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 received 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 activity. 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're going to move in the ones which we think are the toughest to make to the ones which are the easiest to create. Here we go.

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

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This is the purest type 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 solutions. However, the industry as a whole is confusing to many and requires 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 Places 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 create and cultivate content and value. The income is residual and combines devotion and education with community.

A fantastic book that explains this version of residual income is Your Automatic Client by John Warrillow. He walks through, in plain English, the numerous styles of subscription versions and how to potentially This Site 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 seats before finding the Bumbo. Now if I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.

A great example of this is Pat Flynn at PassiveIncome.com because he walks you through how to set up 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 have a look at a local taco stand. Sure, that taco stand may have loyal patrons and make more tips here the best damn beef taco youve ever had, but they also need to wake up each 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 move in or not. Sure, I have to maintain relationships to keep earning that fee, but really that the income is residual because once I sign up one client I am going to earn money off of the money perpetually.

Why do we call these the Electricity 2 Because these demand less specialization and experience, and with the leveraged use of debt that is smart, can operate 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 property supplies, it's the trifecta of residual income. First, a home or rental house can appreciate, therefore capital appreciation is your first long-term benefit of owning a home.

Other people are paying off the mortgage, insurance, property taxes and maintenance at the same time you own that piece of real estate. 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 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 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 that I am going to leave that for the investment side. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for many reasons: a.

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