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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. 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're going to move from the ones which we think will be the most difficult to make to the ones that are the easiest to produce. Here we go.
7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you've sold or created and put it on a stage that you do not run and then get compensation based on when the merchandise is bought or utilized. Most 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 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 promote products. On the other hand, the industry as a whole is confusing to many and requires a tremendous amount of mental and emotional fortitude to make 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 class. But it has considerable cost and you have to continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.
A fantastic book that explains this model of residual income is The Automatic Client by John Warrillow. He walks through, in plain English, the numerous styles of subscription models and the way to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell folks 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 to it to my Amazon account, and someone buys it, I can earn a commission.
A fantastic illustration of this is Pat Flynn at PassiveIncome.com as he walks 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 take a peek at a local taco stand. Sure, that taco stand may have loyal patrons and make the best damn steak taco youve ever had, but they also have to wake up every day and turn the lights on and fire up the grill to get compensated 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 fee, but really 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 these the Electricity 2 Because these demand less specialization and expertise, and with all 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 intelligent debt and other peoples money. When looking at property rents and the potential for income property provides, it is the trifecta of residual income. First, a home or rental property can enjoy, so capital appreciation is the first long-term benefit of owning a house.
Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, taxation protection. Rental income is blog here taxed at a lower rate than ordinary income and you 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 home.
The fourth and maybe most hidden, however important benefit is that over time rents grow, protecting your money against inflation, although your mortgage interest can be at 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 I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for many reasons: a.