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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 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. Normally, income from interest on money that has 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 toughest to make to the ones that are the easiest to create. Here we go.
7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you've sold or created and place 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 have the potential to quickly create royalty streams.
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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. 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 Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it has considerable price and you must continuously create and cultivate content and worth. The income is residual and combines loyalty and education with community.
A good book that explains this model of residual income is Your automated Customer by John Warrillow. He walks through, in plain English, the numerous styles of subscription models 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, then I can earn a commission.
A great example of this will be Pat Flynn in PassiveIncome.com as 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 take a look at a local taco stand. Surethat taco stand may have loyal patrons and also make the best damn steak 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 compensated for their particular tacos.
So, literally tomorrow I am going to earn a fee whether I go in or not. check out here 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 off of the money .
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 work 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 provides, it is the trifecta of residual income. To begin with, a house or rental property can appreciate, so capital appreciation is the very first long-term Recommended Reading benefit of owning a home.
Other people are paying the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, tax 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 possibly most hidden, however important benefit is that over time rents rise, 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 form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore that I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for several reasons: a.