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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 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 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 will be the most difficult to create 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've created or sold and put it on a platform that you do not run and then get compensation based on when the item is bought or utilized. Most 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 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it has considerable cost and you have to continuously create and cultivate content and value. The income is residual and combines devotion and education with community.
A fantastic book that explains this model of residual income is Your automated Customer by John Warrillow. He walks you 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 people what you like and showing them where to receive it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now when 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 illustration of this will be Pat Flynn at PassiveIncome.com because he walks through how to set up 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 look Get More Information at a local taco stand. Sure, that taco stand may have loyal patrons and make the best damn steak taco youve ever had, but they also need to wake up each 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 off of the money perpetually.
Why do we call these the Electricity 2 Because these require less specialization and expertise, and with the leveraged use of smart debt, can operate together.
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2. Real Estate: Real estate is #2 for one simple reason, leverage using intelligent debt and other individuals money. When looking at real estate rents and the potential for income property supplies, it is the trifecta of residual income. First, a house or rental house can appreciate, 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 real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the property.
The fourth and maybe most hidden, however important benefit is that over time rents grow, 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. The majority of us have 401Ks and IRAs, so that I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for several reasons: a.