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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 activity. Normally, income from interest on money that's been loaned does not count as portfolio income.

Now, looking at the sources of residual income, we are going to move from the ones that we think are the toughest to create 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've created or sold and place it on a stage that you do not run and then receive compensation based on when the item is purchased or utilized. The majority of us do not possess the potential to quickly create royalty streams.

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This is the purest 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 market products. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to make 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 Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it has considerable price and you must continuously create and cultivate content and worth. The income is residual and combines devotion and education with community.

A good book that explains this model of residual income is The Automatic Client by John Warrillow. He walks you 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 people what you enjoy and showing them where to receive it. As a Dad, I tried 3 large chairs prior to 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 great illustration of this is Pat Flynn in PassiveIncome.com as he walks through how to set up your own method 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 take 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 browse around this web-site day and turn the lights on and fire up the grill to get paid for their special tacos.

So, literally I am going to earn a fee whether I move in or not. Sure, I have to maintain relationships to keep earning that fee, but truly the income is residual because once I sign up one client I am going to earn money off of the money perpetually.

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

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2. Real Estate: Real estate is #2 for great post to read one simple reason, leverage using intelligent debt and other peoples money. When looking at real estate rents and the potential for income property provides, it's the trifecta of residual income. First, a home or rental house can appreciate, therefore capital appreciation is the very first long-term benefit of owning a home.

Other people are paying 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 can depreciate property 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, but important benefit is that over time rents rise, 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 powerful form 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 the investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for several reasons: a.