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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 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 most difficult to make to the ones which are the easiest to create. 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 stage 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 rapidly create royalty streams.

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This is the most straightforward 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 market products. On the other hand, the industry as a whole is confusing to many and requires 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 Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it has considerable price 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 explains this version of residual income is The automated Client by John Warrillow. He walks you through, in plain English, the numerous styles of subscription models and how to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell people 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, I can earn a commission.

A fantastic example of this will be Pat Flynn in PassiveIncome.com because he walks through how to set up your own method 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 have a peek at a local taco stand. Sure, that taco stand might have loyal patrons and also make the best damn steak taco youve ever had, but they also need to wake up read the article each day and turn the lights on and fire up the grill to Your Domain Name get paid for their particular tacos.

So, literally tomorrow I am going to earn a fee whether I go in or not. Sure, I must maintain relationships read here 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 off of the money perpetually.

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

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2. Real Estate: Property is 2 for one reason, leverage using smart debt and other peoples money. When looking at real estate rents and the potential for income real estate provides, it's the trifecta of residual income. To begin with, a home or rental house can enjoy, therefore capital appreciation is the 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 this piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you 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 upgrades 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 powerful form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore I am going to leave that for the investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for many reasons: a.

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