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Active income is income for which services have been performed. This includes wages, tips, wages, 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 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. 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 are going to move in the ones that we think are the toughest to create to the ones which are the easiest to produce. Here we go.

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

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This is the purest form of passive residual income, if you can attain 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. However, the industry as a whole is confusing to many and requires a tremendous amount of mental and emotional fortitude to produce 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 Places These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. However, it's considerable price and you must continuously create and cultivate content and value. The income is residual and combines loyalty and education with community.

A good book that explains this model of residual income is The Automatic Customer by John Warrillow. He walks you 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 like and showing them where to receive it. As a Dad, I tried 3 large seats prior to finding the Bumbo. Now when I blog about the Bumbo and link for it for my Amazon account, and someone buys it, then I can earn a commission.

A fantastic illustration of this will be Pat Flynn in PassiveIncome.com because he walks through how to set up your own system 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. Sure, that taco stand might have loyal patrons and also make the best damn beef taco youve ever had, but they also have to wake up every day and turn the lights on and fire up the grill to get paid for their special tacos.

So, literally I am going to earn a fee whether I move in or not. Sure, I have to maintain relationships to keep earning that commission, but truly the income is residual because once I sign up one client I am going to earn money from the money .

Why do we call these the Power 2 Because these demand less specialization and expertise, and together with the leveraged use of smart debt, can operate together.

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2. Real Estate: Real estate is #2 for one 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. To begin with, a home or rental property can appreciate, therefore capital appreciation is the very 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 real estate. Third, tax 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 price of mileage, mortgage interest, and updates to the home.

The fourth and possibly most hidden, but important benefit is that over time rents grow, protecting your money against inflation, although your mortgage interest can be in a fixed rate potentially. .

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1. The final and most powerful form 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 the investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for several reasons: you could try these out a.