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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 received 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. Typically, income from interest on money that has 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 will be the toughest 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 have created or sold and place it on a stage that you do not run and then get compensation based on when the item is purchased or utilized. The majority of us do not possess the potential to quickly create freshwater flows.

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This is the most straightforward type 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 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 Places 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 value. The income is remaining and combines devotion and education with community.

A fantastic book that explains this version of residual income is The Automatic Client by John Warrillow. He walks 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 like 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 to it for my Amazon account, and someone buys it, then I can earn a commission.

A fantastic illustration of this will be Pat Flynn in PassiveIncome.com as 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 take 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 needed, but they also need to wake up every day and turn the lights on and fire up useful content 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 have to maintain relationships to keep earning that commission, but truly 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 these the Electricity 2 Because these require less specialization and expertise, and together with all the leveraged use of debt that is smart, can work together.

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

Other men and women 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 also can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the home.

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 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. Most people have 401Ks and IRAs, therefore that I am going to leave that for your investment side. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for several reasons: a.