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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 actions. Normally, income from interest on money that has 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 toughest to create to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you have sold or created and place it on a stage that you do not run and then get compensation based on when the item is purchased or utilized. Most of us do not possess the potential to quickly create royalty streams.

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This is the most straightforward form of passive residual income, if you can achieve 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 promote solutions. 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 potential.

The effort you have to put in is important to consider. .

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5. Subscription Models: Subscription models/Customer Hubs/Member Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it has considerable price and you must continuously create and cultivate content and value. The income is remaining and combines devotion and education with community.

A fantastic book that explains this model of residual income is Your automated Customer by John Warrillow. He walks you through, in plain English, the numerous styles of subscription versions and how 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 seats prior to other finding the Bumbo. Now if I blog about the Bumbo and link for it for my Amazon account, and someone buys it, I can earn a commission.

A fantastic example of this is Pat Flynn at PassiveIncome.com because he walks through how to establish your own system to optimize 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 also make the best damn steak taco youve ever needed, but they 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 if I go in or not. Sure, I must 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 off of the money .

Why do we call them the Electricity 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 intelligent 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 enjoy, so capital appreciation is the very first long-term benefit of owning a home.

Other men and women are paying the mortgage, insurance, property taxes and maintenance at the same time you own that piece of property. Third, taxation 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 price of mileage, mortgage interest, and updates to the home.

The fourth and possibly most hidden, however 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, therefore that I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most powerful tool for several reasons: a.