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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 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 are going to move from the ones that we think are the most difficult to create 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 created or sold and put it on a platform 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 royalty streams.

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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 possible.

The effort you have to 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. However, it's considerable cost and you must continuously make and cultivate content and value. The income is residual and combines loyalty and education with community.

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

4. Affiliate marketing: Getting paid to tell folks what you like and showing them where to get it. As a Dad, I tried 3 large seats 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 example of this is Pat Flynn at PassiveIncome.com as he walks you through how to establish your own system 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 look at a local taco stand. Sure, that taco stand may have loyal patrons and also make the best damn steak taco youve ever had, but they also have to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.

So, literally I am going to earn a fee whether I move in or not. Sure, I must maintain relationships to keep earning that commission, but really 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 them the Electricity 2 Because these demand less specialization and expertise, and with all the leveraged use of debt that is smart, can operate 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 real estate rents and the potential for income real estate provides, it's sites the trifecta of residual income. To begin with, a home 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 while you own this 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 upgrades to the property.

The fourth and maybe 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 type 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 by far the easiest, safest and most powerful tool for look at here now several reasons: a.

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