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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 obtained on a regular basis, with 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 actions. 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 that are the easiest to produce. 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 platform that you do not run and then get compensation based on when the merchandise is purchased or used. The majority of us do not have the potential to rapidly 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. On the other hand, 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 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 become almost its own class. However, it's considerable price and you have to continuously make and cultivate content and value. The income is remaining and combines devotion and education with community.

A good book that explains this version of residual income is Your automated Customer by John Warrillow. He walks through, in plain English, the various styles of subscription models and how to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell people what you enjoy and showing them where to get published here 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 to my Amazon account, and someone buys it, I can earn a commission.

A fantastic illustration of this is Pat Flynn in PassiveIncome.com as he walks you 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 peek at a local taco stand. Surethat taco stand might have loyal patrons and make the best damn beef taco youve ever needed, but they also need to wake up each day and turn the lights on and fire up the grill to get paid for their special tacos.

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

Why do we call these the Power 2 Because these demand less specialization and experience, and together 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 individuals money. When looking at real estate rents and the potential for income real estate provides, it is the trifecta of residual income. First, a house or rental property can enjoy, therefore capital appreciation is your very first long-term benefit of owning a home.

Other people are paying the mortgage, insurance, property taxes and maintenance at the same time you own that 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 paper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and updates to the property.

The fourth and possibly most hidden, however 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 powerful type of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore that I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.