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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 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 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 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 sold or created and put it on a stage that you do not run and then receive compensation based on when the item is bought or used. Most of us do not possess 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 made 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. 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 possible.

The effort you have to 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 become almost its own category. But it has considerable cost and you must continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.

A fantastic 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 models and the way to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell people what you enjoy and showing them where to get it. As a Dad, I tried 3 large seats before finding the Bumbo. Now when I blog about the Bumbo and link to it to 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 set up your own method to optimize 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 need to wake up each 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 a fee if I move in or not. Sure, I have to maintain relationships to keep earning that commission, but truly see post the income is residual because once I sign up one client I am going to make money from the money .

Why do we call them the Power 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: Real estate is #2 for one reason, leverage using intelligent debt and other individuals money. When looking at property rents and the potential for income property provides, it is the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is the first long-term benefit of owning a house.

Other people are paying off the mortgage, insurance, property taxes and maintenance while you own that piece of property. Third, tax 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, websites mortgage interest, and updates 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 look at this now 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. Most people have 401Ks and IRAs, therefore that 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.