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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 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 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 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, machines, patents. A royalty is something you have created or sold and place it on a stage that you do not run and then receive compensation based on when the merchandise is purchased or used. The majority of us do not possess the potential to rapidly create royalty streams.
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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 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it has considerable cost and you have to continuously make and cultivate content and value. The income is residual and combines loyalty and education with community.
A fantastic book that explains this model of residual income is The automated Customer by John Warrillow. He walks you 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 enjoy and showing them where to get it. As a Dad, I tried 3 high chairs prior to 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 will be Pat Flynn in PassiveIncome.com as he walks you through how to set up 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 have a peek at a local taco stand. Sure, that taco go to the website stand might have loyal patrons and make the best damn beef taco youve ever had, but they also need to wake up each day and turn the lights on and fire up the grill to get compensated for their special tacos.
So, literally 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 that the income is residual because once I sign up one client I am going to make money from their money .
Why do we call them the Power 2 Because these demand less specialization and experience, and with all the leveraged use of smart debt, can work together.
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2. Real Estate: Property is #2 for one reason, leverage using intelligent debt and other individuals money. When looking at real estate rents and the potential for income property supplies, it's the trifecta of residual income. First, a house or rental house can enjoy, therefore capital appreciation is the very first long-term benefit of owning a home.
Other people are paying the mortgage, insurance, property taxes and maintenance while you own that piece of property. Third, taxation protection. Rental income is 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 price of mileage, mortgage interest, and upgrades to the home.
The fourth and maybe most hidden, but important benefit is that over time rents grow, 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 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 simplest, safest and most powerful tool for many reasons: a.