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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 has 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 which are the easiest to create. Here we go.

7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you've sold or created and put it on a platform that you do not run and then get compensation based on when the item is purchased or utilized. 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 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 solutions. However, the industry as a whole is confusing to most and requires 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 category. However, it has considerable cost and you have to continuously make and cultivate content and worth. The income is residual and combines devotion and education with community.

A fantastic book that explains this version of residual income is The automated Client 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 enjoy and showing them where to get it. As a Dad, I tried 3 large chairs before finding the Bumbo. Now if I blog about the Bumbo and link to it to my Amazon account, and someone buys it, then I can earn a commission.

A fantastic example of this is Pat Flynn in PassiveIncome.com because he walks 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 have a look at a local taco stand. Surethat taco stand might have loyal patrons and make the best damn steak taco youve ever had, but they also have 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 if I go in or not. Sure, I must maintain relationships to keep earning that commission, but really hop over to here 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 require 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 reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income property provides, it's the trifecta of residual income. First, a house or rental property can appreciate, so 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 property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate real estate by taking a newspaper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the home.

The fourth and maybe 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 get more 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 that, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for many reasons: a.