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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 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. Normally, income from interest on money that has been loaned does not count as portfolio income.
Now, looking at the sources of residual income, we're going to move in the ones that we think will be the toughest 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 have sold or created and place it on a stage that you do not run and then get compensation based on when the item is purchased or utilized. Most of us do not have the potential to rapidly create freshwater flows.
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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 solutions. 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 have to 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's 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 version of residual income is Your automated Client by John Warrillow. He walks you 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 folks what you enjoy and showing them where to get it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now if I blog about the Bumbo and link to it for my Amazon account, and someone buys it, I can earn a commission.
A fantastic example of this is Pat Flynn at PassiveIncome.com because he walks you through how to establish your own method 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 her latest blog take a look at a local taco stand. Sure, that taco stand might have loyal patrons and also 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 this link 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 the income is residual because once I sign up one client I am going to earn money off of the money perpetually.
Why do we call these the Power 2 Because these demand less specialization and experience, and together with all the leveraged use of debt that is smart, can operate together.
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2. Real Estate: Real estate is #2 for one simple reason, leverage using smart debt and other peoples money. When looking at real estate rents and the potential for income property supplies, it's the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is your very first long-term benefit of owning a house.
Other people are paying the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a newspaper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the property.
The fourth and possibly most hidden, but important benefit is that over time rents grow, protecting your cash-flow against inflation, while your mortgage interest can be in 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, so 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 reasons: a.