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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 received 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. 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 from the ones which we think will be the toughest to create to the ones that are the easiest to create. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've sold or created and put it on a stage that you do not run and then get compensation based on when the item is bought or utilized. The majority of us do not possess the potential to quickly create royalty streams.

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This is the most straightforward type 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 promote products. However, 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 All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it's considerable cost and you must continuously create 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 The automated Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription versions 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 get it. As a Dad, I tried 3 high 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, I can earn a commission.

A great example of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish your own system to maximize and investigate this site 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 look at a local taco stand. Sure, that taco stand may have loyal patrons and also make the best damn beef taco youve ever needed, 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 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 really that the income is residual because once I sign up one client I am going to make money from the money .

Why do we call these the Power 2 Because these demand less specialization and expertise, and with all the leveraged use of smart debt, 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 supplies, it is the trifecta of residual income. First, a house or rental property can enjoy, so capital appreciation is the very 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 that piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate real estate by taking a paper deduction on your go now annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the home.

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 in a fixed rate potentially. .

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1. The final and most effective form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so that I am going to leave that for the investment side. Within this, click for more I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for several reasons: a.