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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 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 activity. 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 which we think will be the most difficult to create to the ones which are the easiest to create. Here we go.
7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have sold or created and put it on a platform that you do not run and then receive 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 type of passive residual income, if you can attain 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 many and demands a tremendous amount of mental and emotional fortitude to make 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 Places These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it's considerable cost and you must continuously create and cultivate content and worth. The income is remaining and combines loyalty and education with community.
A fantastic book that explains this version of residual income is Your automated Customer by John Warrillow. He walks you through, in plain English, the numerous styles useful reference of subscription versions and how to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell people what you enjoy and showing them where to receive 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 example of this is Pat Flynn in PassiveIncome.com because he walks you through how to establish your own method to maximize 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 look at a local taco stand. Surethat taco stand might have loyal patrons and make the best damn beef taco youve ever had, but they also need to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.
So, literally tomorrow I am going to earn a fee if I move in or not. Sure, I have to maintain relationships to keep earning that commission, but really the income is residual because once I sign up one client I am going to earn money from their money .
Why do we call them the Power 2 Because these require less specialization and experience, and with the leveraged use of debt that is smart, can operate together.
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2. Real Estate: Property is 2 for one reason, leverage using intelligent debt and other peoples money. When looking at property rents and the potential for income property supplies, it's the trifecta of residual income. To begin with, a house or rental house can enjoy, so capital appreciation is the first long-term benefit of owning a house.
Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time you own that piece of real estate. 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 updates to the home.
The fourth and possibly most hidden, however important benefit is that over time rents grow, protecting your money against inflation, although your mortgage interest can be in a fixed rate potentially. .
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1. The final and most effective type of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, so I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.