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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 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 actions. 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 in the ones which we think are the most difficult to make to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have created or sold and place it on a platform that you do not run and then get compensation based on when the merchandise is purchased or utilized. The majority of us do not have the potential to quickly create freshwater flows.

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This is the purest 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 market 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 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it's considerable cost and you have to continuously create and cultivate content and value. The income is remaining 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 numerous styles of subscription versions and the way to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to receive it. As a Dad, I tried 3 large chairs before 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 illustration of this is Pat Flynn in PassiveIncome.com because he walks you through how to set up your own system to maximize 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 take a peek at a local taco stand. Surethat taco stand may have loyal patrons and also make the best damn beef 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 special tacos.

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

Why do we call them the Electricity 2 Because these require less specialization and expertise, and together with the leveraged use of smart debt, can operate you can try this out together.

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2. Real Estate: Real estate is #2 for one simple reason, leverage using intelligent debt and other individuals money. When looking at property rents and the potential for income property supplies, it's the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is the 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 property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also 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 possibly most hidden, but 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. The majority of us have 401Ks and IRAs, therefore I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most powerful tool for many reasons: a.