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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 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 has been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we're going to move from the ones which 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 audio, books, inventions, machinesand patents. A royalty is something you have sold or created and put it on a stage that you do not run and then get compensation based on when the item is purchased or utilized. Most of us do not have the potential to rapidly create royalty streams.
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This is the purest form 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 solutions. On the other hand, the industry as a whole is confusing to many and demands 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 Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it's considerable cost and you have to 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 enjoy and showing them where to receive it. As a Dad, I tried 3 large seats prior to 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 fantastic illustration of this will be Pat Flynn in PassiveIncome.com because he walks you through how to set up your own system to optimize 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 peek at a local taco stand. Sure, that 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 special tacos.
So, literally tomorrow I am going to earn a fee whether 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 make money from the money .
Why do we call them the Power 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: 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 provides, it is the trifecta of residual income. To begin with, a home or rental house can enjoy, so capital appreciation is the first long-term benefit of owning a home.
Other people 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 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, however Go Here important benefit is that over time rents rise, 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 effective form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so that I am going to leave that for the investment side. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for many reasons: a.