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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 received 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 sources of residual income, we're going to move in the ones which we think are the toughest to make to the ones that are the easiest to create. Here we go.

7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you have sold or created 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 freshwater flows.

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This is the most straightforward 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 solutions. 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 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. However, it has considerable cost and you must continuously make and cultivate content and worth. The income is remaining and combines devotion and education with community.

A good book that explains this model of residual income is Your automated Client by John Warrillow. He walks through, in plain English, the various styles of subscription versions and the way 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 large chairs prior to finding the Bumbo. Now when I blog about the Bumbo and link to it to my Amazon account, and someone buys it, I can earn a commission.

A great illustration of this will be Pat Flynn at PassiveIncome.com as he walks you through how to establish your own method to maximize 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 have 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 every day and turn the lights on and fire up the grill to get compensated for their special tacos.

So, literally tomorrow I am going to earn anchor a fee if I move in or not. Sure, I have to 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 make money off of their money .

Why do we call them the Electricity 2 Because these require less specialization and expertise, and with 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 supplies, it's the trifecta of residual income. First, a house or rental house can enjoy, therefore capital appreciation is the 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 property. 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 price of mileage, mortgage interest, and upgrades 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 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 your investment side. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.

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