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

Now, looking at the resources of residual income, we are going to move from the ones that we think are the most difficult to make to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you have created or sold and place 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 quickly create freshwater flows.

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This is the purest type 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. However, the industry as a whole is confusing to most and requires 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 category. However, it has considerable cost and you have to continuously make and cultivate content and worth. The income is remaining and combines loyalty and education with community.

A good book that explains this version of residual income useful content is The automated 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 folks what you like and showing them where to get it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now if I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.

A great example of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish your own system 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 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 each 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 fee, but really the income is residual because once I sign up one client I am going to earn money off of their money perpetually.

Why do we call these the Power 2 Because these require less specialization and expertise, and with 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 property rents and the potential for income property supplies, it is the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is your very first long-term benefit of owning a home.

Other people are paying off the mortgage, insurance, property taxes and maintenance at the same time you own that piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate real estate by taking a paper 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, but important benefit is that over time rents grow, 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 form 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 top article our Foundation Freedom Phases is undoubtedly the simplest, safest and most powerful tool for many reasons: a.