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

Now, looking at the sources of residual income, we're going to move from the ones that we think will be 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, machinesand patents. A royalty is something you have sold or created and place it on a platform that you do not run and then receive compensation based on when the merchandise is purchased or used. The majority of us do not possess the potential to rapidly create freshwater flows.

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This is the most straightforward 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 products. On the other hand, 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 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. But it has considerable cost and you have to continuously create and cultivate content and value. The income is remaining and combines loyalty and education with community.

A good book that explains this version of residual income is The Automatic Client by John Warrillow. He walks you through, in plain English, the numerous styles of subscription versions and anchor the way 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 chairs before finding the Bumbo. Now if I blog about the Bumbo and link for it for my Amazon account, and someone buys it, then I can earn a commission.

A fantastic illustration of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish your own method 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. Surethat taco stand may have loyal patrons and make the best damn beef taco youve ever needed, but they also need to wake up every day and turn the lights on and fire up the grill to get compensated for their special tacos.

So, literally tomorrow I am going to earn a fee whether I go 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 off of their money perpetually.

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 work together.

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2. Real Estate: Real estate is #2 for one reason, leverage using intelligent debt and other individuals money. When looking at real estate rents and the potential for income property supplies, it's the trifecta of residual income. First, a home or rental house can enjoy, so capital appreciation is your first long-term benefit of owning a house.

Other people are paying off the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a paper deduction on your annual tax return Web Site not to mention expensing the price of mileage, mortgage interest, and upgrades to the home.

The fourth and possibly most hidden, however important benefit is that over time rents rise, protecting your money against inflation, while your mortgage interest can be at 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 I am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for many reasons: a.

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