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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 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 actions. Normally, 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 from the ones that we think are the most difficult to make to the ones which are the easiest to create. 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 receive compensation based on when the merchandise is bought or utilized. The majority of us do not possess the potential to quickly create freshwater flows.
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This is the most straightforward type of passive residual income, if you can achieve it. .
6. Network Marketing: Network marketing is a unique business model and has created 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. On the other hand, the industry as a whole is confusing to most and demands 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. But it has considerable price and you must continuously make and cultivate content and worth. The income is residual 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 through, in plain English, the numerous styles of subscription versions and how to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell folks what you like and showing them where to get it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now if I blog about the Bumbo and link to it to my Amazon account, and someone buys it, then I can earn a commission.
A great illustration of these details this is Pat Flynn in PassiveIncome.com because he walks through how to set up your own system to optimize look what i found 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. Sure, that taco stand may have loyal patrons and make the best damn beef 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 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 really that the income is residual because once I sign up one client I am going to make money from their money perpetually.
Why do we call them the Electricity 2 Because these demand less specialization and expertise, and with the leveraged use of smart debt, can work 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 provides, it's the trifecta of residual income. First, a house or rental property can appreciate, so capital appreciation is the first long-term benefit of owning a home.
Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time you own this piece of real estate. 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 cost of mileage, mortgage interest, and updates to the home.
The fourth and maybe most hidden, however important benefit is that over time rents grow, protecting your money 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. The majority of us have 401Ks and IRAs, therefore I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for many reasons: a.