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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 required 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 resources 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 audio, books, inventions, machines, patents. A royalty is something you have sold or created and put it on a platform that you do not run and then receive compensation based on when the item is purchased or utilized. The majority 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 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. On the other hand, the industry as a whole is confusing to many 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 All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it's considerable cost and you must continuously create and cultivate content and value. The income is residual and combines loyalty and education with community.

A fantastic book that explains this version of residual income is Your automated Client by John Warrillow. He walks through, in plain English, the various 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 if 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 as he walks you 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 peek at a local taco stand. Sure, that taco stand might have loyal patrons and make the best damn beef taco youve ever needed, but they also need to wake up look at here 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 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 make money from the money perpetually.

Why do we call these the Electricity 2 Because these require less specialization and expertise, and together with 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 property rents and the potential for income real estate supplies, it is the trifecta of residual income. First, a house or rental property can appreciate, therefore capital appreciation is the first long-term benefit of owning a house.

Other men and women are paying 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 property by taking a paper deduction on your annual tax return not to mention expensing the price check my reference of mileage, mortgage interest, and upgrades to the property.

The fourth and maybe 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 powerful 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 aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, Web Site safest and most effective tool for several reasons: a.