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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. 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 from the ones which we think are the toughest to make 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 put it on a platform that you do not run and then receive compensation based on when the merchandise is purchased or used. The majority of us do not have the potential to rapidly create royalty streams.
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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 promote solutions. On the other hand, the industry as a whole is confusing to many 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 Places These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. But it has considerable cost and you must continuously make and cultivate content and worth. The income is remaining and combines devotion and education with community.
A fantastic book that explains this model of residual income is The automated Client by John Warrillow. He walks through, in plain English, the numerous 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 get it. As a Dad, I tried 3 high chairs before 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 great illustration of this is Pat Flynn in PassiveIncome.com as he walks through how to set up your own system i thought about this 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 take a look 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 need to wake up each day and turn the lights on and fire up the grill to get paid 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 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 Electricity 2 Because these require 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 reason, leverage using smart 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. First, a house or rental property can appreciate, so capital appreciation is your first long-term benefit of owning a house.
Other people are paying off 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 can depreciate property 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, but important benefit Read More Here is that get redirected here over time rents rise, 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 effective 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 aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for several reasons: a.