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Active income is income for which solutions 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 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're going to move in the ones which we think are the toughest to make to the ones that are the easiest to produce. 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 bought or used. 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 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 make 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 Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. However, it has considerable cost and you must continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.

A good book that explains this model of residual income is Your 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 my latest blog post paid to tell folks what you like and showing them where to get it. As a Dad, I tried 3 large seats prior to finding the Bumbo. Now when 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 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 take a look 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 every day and turn the resource lights on and fire up the grill to get paid for their special tacos.

So, literally 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 truly that 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 these the Power 2 Because these require less specialization and experience, and together with 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 peoples money. When looking at real estate rents and the potential for income property supplies, it's the trifecta of residual income. To begin with, a house or rental house can enjoy, so capital appreciation is your first long-term benefit of owning a house.

Other men and women are paying the mortgage, insurance, property taxes and maintenance at the same time you own this piece of real estate. Third, taxation protection. Rental income is why not look here 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 upgrades to the home.

The fourth and possibly most hidden, however important benefit is that over time rents grow, protecting your money against inflation, while your mortgage interest can be at 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, so I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most powerful tool for several reasons: a.