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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 has been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we're going to move in the ones that we think will be the most difficult to create to the ones that are the easiest to produce. Here we go.
7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you've created or sold and place it on a platform that you do not run and then get compensation based on when the item is bought or used. The majority of us do not possess the potential to rapidly 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 promote solutions. 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 possible.
The effort you must put in is important to consider. .
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5. Subscription Models: Subscription models/Customer Hubs/Member Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. However, it has considerable price and you have to continuously make and cultivate content and value. The income is residual and combines loyalty and education with community.
A good book that explains this model of residual income is The Automatic 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 people what you enjoy and showing them where to receive it. As a Dad, I tried 3 high chairs before finding the Bumbo. Now when I blog about the Bumbo and link to it to my Amazon account, and someone buys it, then I can earn a commission.
A fantastic illustration of this is Pat Flynn at PassiveIncome.com because he walks you through how to establish your own system to maximize and profit from your 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 peek at a local taco stand. Surethat taco stand may have loyal patrons and also make the best damn beef 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 particular tacos.
So, literally tomorrow I am going to earn a fee whether I go in or not. Sure, I have to 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 from their money perpetually.
Why do we call these the Power 2 Because these require less specialization and expertise, and with all the leveraged use of debt that is smart, can operate together.
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2. Real Estate: Property is #2 for one reason, leverage using smart debt and other individuals money. When looking at property rents and the potential for income real estate supplies, it's the trifecta of residual income. To begin with, a house or rental property can enjoy, so capital appreciation is the first long-term benefit of owning a home.
Other people are paying off the mortgage, insurance, property taxes and maintenance while you own that piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate real estate by taking a newspaper deduction on your annual tax return not to mention expensing the cost 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 cash-flow against inflation, while your mortgage interest can be at a fixed rate potentially. .
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1. The final and most powerful 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 aspect. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for many the original source reasons: a.