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Active income is income for which solutions 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 received on a regular basis, with 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 activity. Normally, income from interest on money that's been loaned does not count as portfolio income.

Now, looking at the resources of residual income, we're going to move from the ones which we think will be the most difficult to create to the ones that are the easiest to create. 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 platform that you do not run and then receive compensation based on when the merchandise is bought or utilized. Most of us do not possess the potential to rapidly create royalty streams.

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This is the most straightforward type of passive residual income, if you can achieve 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 solutions. On the other hand, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to produce residual income possible.

The effort you must 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 become almost its own class. But it has considerable price and you must continuously create and cultivate content and worth. The income is remaining and combines loyalty and education with community.

A fantastic book that explains this version of residual income is The automated Client by John Warrillow. He walks through, in plain English, the various styles of subscription versions and how to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to get it. As a Dad, I tried 3 large seats before finding the Bumbo. Now when I blog about the Bumbo and link for 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 take a look at a local taco stand. Sure, that taco stand may have loyal patrons and make the best damn beef taco youve ever needed, but they also have to wake up each day and turn the lights on this contact form 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 earn money off of their money .

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

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2. Real Estate: Property is 2 for one simple reason, leverage using intelligent debt and other individuals money. When looking at real estate rents and the potential for income property provides, it is the trifecta of residual income. First, a house or rental house can enjoy, so capital appreciation is your 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 property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate real estate by taking a newspaper deduction on your annual tax return not to mention expensing the cost 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 money against inflation, while your mortgage interest can be in a fixed rate potentially. .

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1. The final and most effective type 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 the investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for several reasons: a.