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Active income is income for which services 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 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 in the ones that we think will be the most difficult to make to the ones which are the easiest to create. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you have 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 utilized. The majority of us do not have the potential to quickly create freshwater flows.

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This is the purest 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 market products. However, 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 have to 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 become almost its own class. But it's considerable cost and you have to continuously create and cultivate content and worth. The income is remaining and combines loyalty and education with community.

A fantastic book that explains this model of residual income is The automated Customer 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 folks what you like and showing them where to receive it. As a Dad, I tried 3 high 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, then I can earn a commission.

A great illustration of this will be Pat Flynn at PassiveIncome.com because he walks through how to establish your own system 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 peek at a local taco stand. Sure, that taco stand might have loyal patrons and also 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 compensated for their particular tacos.

So, literally I am going to home earn a fee whether I move in or not. Sure, I must maintain relationships to keep earning that fee, but truly that the income is residual because once I sign up one client I am going to earn money off of the money .

Why do we call these the Electricity 2 Because these require less specialization and expertise, and together 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 intelligent debt and other peoples money. When looking at real estate rents and the potential for income real estate supplies, it's the trifecta of residual income. To begin with, a house or rental property can appreciate, therefore capital appreciation is the 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 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 newspaper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and updates to the property.

The fourth and maybe most hidden, however important benefit is that over time rents grow, protecting your cash-flow against inflation, although your mortgage interest can be in a fixed rate potentially. .

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1. The final and most powerful form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore that I am going to leave that for your investment side. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for many reasons: a.