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Active income is income for which solutions 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 activity. Typically, income from interest on money that's been loaned does not count as portfolio income.

Now, looking at the resources of residual income, we are going to move from the ones that we think will be the most difficult 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've created or sold and place it on a stage that you do not run and then receive compensation based on when the merchandise is bought or used. The majority of us do not have the potential to rapidly create royalty streams.

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This is the most straightforward form of passive residual income, if you can attain 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. However, the industry as a whole is confusing to many 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 class. But it has considerable price and you must continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.

A good book that explains this version of residual income is The Automatic Customer 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 folks what you enjoy and showing them where to receive it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now if I blog about the Bumbo and link to it for my Amazon account, and someone buys it, I can earn a commission.

A fantastic example of this is Pat Flynn at PassiveIncome.com because he walks 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 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 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 I am going to earn a fee if I move in or not. Sure, I have to maintain relationships to keep earning that fee, but really that the income is residual because once I sign up one client I am going to earn money off of the money perpetually.

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

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2. Real Estate: Real estate is #2 for one simple reason, leverage using smart debt and other individuals money. When looking at property rents and the potential for income real estate provides, it is the trifecta of residual income. To that site begin with, a house or rental property can appreciate, therefore capital appreciation is your first long-term benefit of owning a home.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time you own this piece of real estate. 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, mortgage interest, and updates to the home.

The fourth and maybe most hidden, but important benefit is that over time rents grow, protecting your cash-flow 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, so that I am going to leave that for the investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for several reasons: a.