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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 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 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 that we think will be 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, machinesand patents. A royalty is something you have sold or created 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 possess 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 promote solutions. On the other hand, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to produce 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 Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. But it's considerable cost and you have to 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 Your Automatic Customer 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 people what you enjoy and showing them where to get it. As a Dad, I tried 3 high 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 great illustration of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish 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 have a look at a local taco stand. Sure, that taco stand might have loyal patrons and also make the best damn beef taco youve ever had, but they also need to wake up each 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 truly 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 them the Power 2 Because these require less specialization and expertise, 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 simple reason, leverage using smart debt and other individuals money. When looking at property rents and the potential for income property supplies, it's the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is the first long-term benefit of owning a home.

Other people are paying the mortgage, insurance, property taxes and maintenance while you own that piece of real estate. Third, tax 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 try these out mention expensing the cost of mileage, mortgage interest, and updates to the property.

The fourth and maybe most hidden, but important benefit is that over time rents rise, 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 powerful type 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 the investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for many reasons: a.