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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 obtained 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 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're going to move from the ones that we think are the most difficult to create to the ones which are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you've sold or created and place it on a stage that you do not run and then receive compensation based on when the item is purchased or utilized. The majority of us do not possess the potential to rapidly create freshwater flows.

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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 market products. However, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to produce residual income possible.

The effort you must 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 has considerable price and you must continuously create and cultivate content and value. The income is remaining 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 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 like and showing them where to click here to find out more receive it. As a Dad, I tried 3 high seats before finding the Bumbo. Now when 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 will be Pat Flynn at PassiveIncome.com because he walks through how to establish your own method to maximize and 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 peek at a local taco stand. Surethat taco stand may have loyal patrons and also make the best damn beef taco youve my latest blog post 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 particular 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 really that 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 with the leveraged use of smart debt, can work together.

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

Other people are paying the mortgage, insurance, property taxes and maintenance while you own that piece of property. 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 upgrades to the property.

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 effective type 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 that, I think our Foundation Freedom other Phases is undoubtedly the simplest, safest and most powerful tool for several reasons: a.