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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 received 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. Typically, 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 will be the most difficult to make to the ones that are the easiest to create. Here we go.
7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have created or sold and place it on a platform that you do not run and then get compensation based on when the merchandise is bought or used. Most of us do not have 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 made 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. However, the industry as a whole is confusing to most 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 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 fantastic book that explains this version of residual income is The 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 enjoy and showing them where to get it. As a Dad, I tried 3 large seats before finding the Bumbo. Now this post when I blog about the Bumbo and link for it for my Amazon account, and someone buys it, then I can earn a commission.
A fantastic example of this is Pat Flynn at PassiveIncome.com because he walks through how to establish your own method 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 have a peek at a local taco stand. Surethat taco stand might have loyal patrons and make the best damn steak taco youve ever had, but they also have to wake up every 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 whether I move in or not. Sure, I have to maintain relationships to keep earning that commission, but truly that the income is residual because once I sign up one client I am going to earn money off of their useful content money perpetually.
Why do we call these the Power 2 Because these demand 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 intelligent debt and other individuals money. When looking at real estate rents and the potential for income real estate supplies, it's the trifecta of residual income. To begin with, a home or rental property can enjoy, therefore 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 while you own that piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate real estate by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the property.
The fourth and maybe most hidden, but important benefit is that over time rents grow, 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 effective type of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for several reasons: a.