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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 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 has been loaned does not count as portfolio income.

Now, looking at the sources of residual income, we are going to move in the ones which we think are the most difficult to make to the ones which are the easiest to produce. Here we go.

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

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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 promote products. However, the industry as a whole is confusing to most and requires 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 Places These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. However, it has considerable price and you must continuously create and cultivate content and worth. The income is residual and combines devotion and education with community.

A good book that explains this version of residual income is The automated Client 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 people what you like and showing them where to receive it. As a Dad, I tried 3 high 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 I can earn a commission.

A great example of this is Pat Flynn in PassiveIncome.com as he walks 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 take a look at a local taco stand. Surethat taco stand may have loyal patrons and also make 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 compensated for their particular tacos.

So, literally tomorrow I am going to earn a fee whether I move 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 make money from the money perpetually.

Why do we call these the Electricity 2 Because these demand less specialization and expertise, and with all the leveraged use of debt that is smart, can operate 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 real estate rents and the potential for income property provides, it's the trifecta of residual income. To begin with, a home or rental property can appreciate, so capital appreciation is the very first long-term benefit of owning a home.

Other people are paying off the mortgage, insurance, property taxes and maintenance while you own that piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you 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 from this source grow, protecting your money 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, my review here in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, so that I am going to leave that for the investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for several reasons: a.