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Active income is income for which services 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 received 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's 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 which are the easiest to create. 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 platform that you do not run and then get compensation based on when the item is bought or utilized. Most of us do not have the potential to quickly 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 products. However, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to produce residual income potential.
The effort you must put in is important to consider. .
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5. Subscription Models: Subscription models/Customer Hubs/Member Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. But it's considerable cost and you have to continuously create and cultivate content and worth. The income is remaining and combines devotion and education with community.
A good book that explains this version of residual income is Your 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 people what you like and showing them where to get it. As a Dad, I tried 3 high chairs prior to finding the Bumbo. Now if I blog about the he has a good point Bumbo and link to it for my Amazon account, and someone buys it, I can earn a commission.
A fantastic illustration of this will be Pat Flynn at PassiveIncome.com because he walks you through how to set up 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 look 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 special tacos.
So, literally tomorrow I am going to earn a fee if 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 earn money from the money .
Why do we call these the Power 2 Because these require less specialization and expertise, and with all the leveraged use of smart debt, can work together.
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2. Real Estate: Property is 2 for one simple reason, leverage using smart debt and other individuals money. When looking at real estate rents and the potential for income property supplies, it is the trifecta of residual income. To begin with, a house or rental house can enjoy, therefore 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 that piece of property. Third, taxation 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 price 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 cash-flow against inflation, although your mortgage interest can be in 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 that I am going to leave that for the investment side. Within this, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most powerful tool for many reasons: a.