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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. Typically, income from interest on money that's been loaned does not count as portfolio income.
Now, looking at the sources of residual income, we are going to move in the ones that we think are the most difficult to create to the ones which are the easiest to produce. Here we go.
7. Royalties: the creation of music, 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 bought or utilized. Most of us do not possess the potential to quickly create freshwater flows.
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This is the purest 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 market products. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to make 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. But it's considerable price and you have to continuously make and cultivate content and value. The income is remaining and combines devotion and education with community.
A good book that explains this version of residual income is Your Automatic Customer by John Warrillow. He walks through, in article source plain English, the various styles of subscription versions and the way to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell people what you like 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, I can earn a commission.
A great illustration of this is Pat Flynn at PassiveIncome.com because he walks through how to establish your own system to optimize 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 make the best damn steak 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 compensated for their special 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 commission, but truly that the income is residual because once I sign up one client I am going to make money off of the money perpetually.
Why do we call them the Electricity 2 Because these demand less specialization and expertise, and with the leveraged use of debt that is smart, can operate together.
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2. Real Estate: Real estate is #2 for one reason, leverage using intelligent debt and other peoples 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 home or rental house can appreciate, so capital appreciation is the very first long-term benefit of owning a home.
Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you 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 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 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 side. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for several reasons: a.