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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 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. Typically, income from interest on money that has 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 toughest to make to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you've sold or created and put it on a platform that you do not run and then get compensation based on when the item 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 most straightforward 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 market solutions. 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 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 category. However, it has considerable price and you have to continuously create and cultivate content and worth. The income is remaining and combines loyalty and education with community.

A good book that explains this version of residual income is The Automatic Client by John Warrillow. He walks you through, in plain English, the numerous styles of subscription models and the way to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell you can find out more 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 fantastic illustration of this is Pat Flynn at PassiveIncome.com as he walks you through how to set up your own method to maximize this link 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. Sure, that taco stand might have loyal patrons and also make the best damn beef taco youve ever needed, but they also have 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 whether I move in or not. Sure, I must maintain relationships to keep earning that fee, but truly the income is residual because once I sign up one client I am going to make money off of their money perpetually.

Why do we call these the Power 2 Because these require less specialization and experience, 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 reason, leverage using smart 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 home or rental property can enjoy, therefore capital appreciation is your 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 real estate by taking a newspaper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the property.

The fourth and maybe most hidden, but important benefit is that over time rents grow, protecting your cash-flow against inflation, while 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. Most people have 401Ks and IRAs, so 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 effective tool for several reasons: a.