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Active income is income for which solutions 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 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. Typically, 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 from the ones that we think are the most difficult to create to the ones that are the easiest to create. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've created or sold and put it on a stage that you do not run and then receive compensation based on when the merchandise is purchased or used. 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 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 market products. On the other hand, the industry as a whole is confusing to most and demands 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. However, it's considerable cost and you have to continuously create and cultivate content and worth. The income is remaining and combines devotion and education with community.

A good 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 the way 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 large chairs prior to finding the Bumbo. Now when I blog about the Bumbo and link to it for my Amazon account, and someone buys it, I our website can earn a commission.

A fantastic illustration of this will be Pat Flynn at PassiveIncome.com because he walks through how to set up your own system 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 look at a local taco stand. Surethat 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 I am going to earn a fee if 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 earn money from the money .

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 work together.

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2. Real Estate: Property is 2 for one simple reason, leverage using intelligent debt and other peoples money. When looking at property rents and the potential for income property provides, it is the trifecta of residual income. To begin with, a home or rental property can enjoy, so capital appreciation is the very first long-term benefit of owning a home.

Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate real estate by taking a paper 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 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 form 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 easiest, safest and most effective tool for several reasons: a.