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

7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you've created or sold and put it on a stage that you do not run and then get compensation based on when the item is purchased or used. Most of us do not possess the potential to rapidly create freshwater flows.

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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 most and demands 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. But it's considerable price and you must continuously create and cultivate content and worth. The income is remaining and combines devotion and education with community.

A good book that explains this version of residual income is The Automatic Client 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 Home Page people what you enjoy and showing them where to receive it. As a Dad, I tried 3 high chairs prior to finding the Bumbo. Now when I blog about the Bumbo and link to it for my Amazon account, and someone buys it, I can earn a commission.

A great illustration of this is Pat Flynn at PassiveIncome.com because he walks through how to set up your own system 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. Sure, that taco stand may have loyal patrons and make the best damn beef taco youve ever had, but they also need to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.

So, literally tomorrow I am going to earn a fee if 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 make money from their 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 smart debt, can operate together.

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2. Real Estate: Real estate is 2 for one reason, leverage using smart 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. To begin with, a home or rental house can appreciate, so 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 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 also can depreciate property by taking a newspaper 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, however important benefit is that over time rents grow, protecting your cash-flow 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. The majority of us have 401Ks and IRAs, so that I am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for several reasons: a.