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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 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. 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 make to the ones which are the easiest to create. Here we go.

7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you have created or sold and put it on a platform that you do not run and then receive compensation based on when the item is purchased or used. Most of us do not have the potential to quickly create royalty streams.

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This is the most straightforward 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 potential.

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 become almost its own category. But it has considerable price and you have to continuously make 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 The Automatic Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription models and the way to potentially apply them to your business.

4. Affiliate marketing: Getting learn the facts here now paid to tell people what you like and showing them where go to my site 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 for 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 set up your own method to optimize 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 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 particular tacos.

So, literally I am going to earn a fee if I move in or not. Sure, I must 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 their money perpetually.

Why do we call them 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: Real estate is 2 for one simple reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income real estate provides, it is the trifecta of residual income. First, a home or rental property can enjoy, therefore capital appreciation is your very first long-term benefit of owning a home.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property by taking a newspaper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the read here property.

The fourth and possibly most hidden, however important benefit is that over time rents rise, protecting your money against inflation, while your mortgage interest can be in a fixed rate potentially. .

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1. The final and most effective form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore 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 effective tool for several reasons: a.