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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 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 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 will be the most difficult to make to the ones that are the easiest to create. 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 stage that you do not run and then get compensation based on when the merchandise is bought or used. The majority of us do not have the potential to quickly create freshwater flows.

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This is the most straightforward type of passive residual income, if you can achieve 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 produce residual income potential.

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 category. However, it has considerable price and you have to continuously create and cultivate content and worth. The income is residual 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 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 folks what you like and showing them where to receive it. As a Dad, I tried 3 high seats before finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.

A great example of this will be Pat Flynn at PassiveIncome.com because he walks use this link through how to establish your own system 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 take 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 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 tomorrow I am going to earn a fee whether I go 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 make money off of their money perpetually.

Why do we call these the Power 2 Because these require less specialization and expertise, and with the leveraged use of debt that is smart, can operate together.

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2. Real Estate: Real estate is 2 for one reason, leverage using intelligent debt and other individuals money. When looking at real estate rents and the potential for income real estate provides, it's the trifecta of residual income. To begin with, a home or rental property can appreciate, so 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 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 real estate by taking a newspaper have a peek at this website deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and updates to the home.

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 at 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 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 many reasons: a.