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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 activity. 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're going to move from the ones which we think are the toughest to make to the ones which are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you have created or sold and place it on a stage that you do not run and then receive compensation based on when the item is purchased or utilized. Most of us do not have the potential to quickly 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 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it has considerable price and you must continuously make and cultivate content and value. The income is residual and combines devotion and education with community.

A fantastic book that explains this version of residual income is Your Automatic Client by John Warrillow. He walks you through, in plain English, the numerous styles of subscription models and how 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 chairs before finding the Bumbo. Now when I blog about the Bumbo and link to it to 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 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 peek at a local taco stand. Surethat taco stand may have loyal patrons and make the best damn steak taco youve ever needed, but they i was reading this also have to wake up each 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 go in or not. Sure, I have to maintain relationships to keep earning that fee, but really 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 experience, and together with all the leveraged use of smart debt, can work together.

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2. Real Estate: Property is 2 for one reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income property provides, it is the trifecta of residual income. First, a house or rental house can enjoy, therefore capital appreciation is your first long-term benefit of owning a house.

Other men and women are paying 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 real estate by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the home.

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 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. Most people have 401Ks and IRAs, therefore that I am going to leave that for the investment side. Within this, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for several reasons: a.