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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 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. Typically, income from interest on money that has been loaned does not count as portfolio income.

Now, looking at the resources of residual income, we're going to move in the ones that we think will be the most difficult 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've sold or created and put it on a stage that you do not run and then get compensation based on when the merchandise is purchased or utilized. Most 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 promote solutions. 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 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 become almost its own category. But it has considerable cost and you must continuously make and cultivate content and worth. The income is remaining and combines devotion and education with community.

A good book that official statement explains this version of residual income is The Automatic Client 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 paid to tell people what you like and showing them where to get it. As a Dad, I tried 3 high seats 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 fantastic example of this will be Pat Flynn at PassiveIncome.com as he walks through how to set up your own method to optimize 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 have a peek at a local taco stand. Sure, that taco stand may have loyal patrons and also 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 compensated for their particular tacos.

So, literally tomorrow I am going to earn a fee whether I move in or not. Sure, I must 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 earn money from the money .

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

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2. Real Estate: Property is 2 for one reason, leverage using smart debt and other individuals money. When looking at property rents and the potential for income property provides, it's the trifecta of residual income. First, a home or rental property can appreciate, therefore capital appreciation is your very first long-term benefit of owning a house.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time 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 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, 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 effective 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 your investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for many reasons: a.