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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 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. 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 in the ones that we think will be the toughest to make to the ones which are the easiest to produce. Here we go.

7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you have sold or created and place it on a stage that you do not run and then receive compensation based on when the item is purchased or used. 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 products. However, the industry as a whole is confusing to most and requires 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 Places These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. However, it's considerable price and you have to continuously create and cultivate content and worth. The income is residual and combines loyalty and education with community.

A fantastic book that explains this model of residual income is The automated Client by John Warrillow. He walks through, in plain English, the various styles of subscription versions and the way to potentially apply them to click here now 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 for my Amazon account, and someone buys it, then I can earn a commission.

A great illustration of this will be Pat Flynn at PassiveIncome.com because he walks you 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 may have loyal patrons and 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 compensated for their special tacos.

So, literally I am going to earn a fee if I go in or not. Sure, I must maintain relationships to keep earning that fee, but truly the income is residual because once I sign up one client I am going to make money from the money perpetually.

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

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2. Real Estate: Property is #2 for one simple reason, leverage using intelligent 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 house or rental house can enjoy, therefore capital appreciation is the first long-term benefit of owning a house.

Other people are paying the mortgage, insurance, property taxes and maintenance at the same time you own that 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 property.

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 in a fixed rate potentially. .

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1. The final and most powerful type of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore that I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for several reasons: a.