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Active income is income for which services 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 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 resources of residual income, we are going to move in the ones which we think are the toughest to create to the ones that are the easiest to produce. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you have created or sold and put it on a platform that you do not run and then get compensation based on when the item is purchased or utilized. Most of us do not possess the potential to quickly create royalty streams.
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This is the purest type of passive residual income, if you can attain 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 demands 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. But it has considerable cost and you must continuously create and cultivate content and value. The income is remaining and combines loyalty and education with community.
A fantastic book that explains this version of residual income is The Automatic Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription models and how to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to receive it. As a Dad, I tried 3 large chairs before finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.
A blog great illustration of this is Pat Flynn in PassiveIncome.com as he walks 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 take a look at a local taco stand. Surethat taco stand may have loyal patrons and also make the best damn beef taco youve ever needed, but they also have to wake up every day and turn the lights on and fire up the grill to get paid for their special tacos.
So, literally tomorrow I am going to earn a fee if I move 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 earn money from the money .
Why do we call them the Electricity 2 Because these demand less specialization and experience, and with the leveraged use of smart debt, can work together.
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2. Real Estate: Property is 2 for one simple reason, leverage using intelligent 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 your very first long-term benefit of owning a house.
Other men and women are paying the mortgage, insurance, property taxes and maintenance at the same time you own that piece of property. Third, taxation protection. Rental income is browse around this site 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 price of mileage, mortgage interest, and updates 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 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, so that I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for several reasons: a.