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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 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's been loaned does not count as portfolio income.
Now, looking at the sources of residual income, we are going to move from the ones that we think will be the toughest to make to the ones which are the easiest to produce. Here we go.
7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you've created or sold and place it on a stage that you do not run and then receive compensation based on when the item is bought or utilized. The majority of us do not possess the potential to quickly create freshwater flows.
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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 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 products. On the other hand, the industry as a whole is confusing to many and demands 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. But it has considerable cost and you have to continuously make and cultivate content and value. The income is remaining and combines loyalty and education with community.
A good book that explains this model of residual income is The Automatic Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription models and how to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell folks what you like helpful site and showing them where to receive it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now when I blog about the Bumbo and link for it for my Amazon account, and someone buys it, I can earn a commission.
A great example of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish 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 peek at a local taco stand. Surethat taco stand may 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 go in or not. Sure, I must 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 from the money .
Why do we call these the Electricity 2 Because these demand less specialization and experience, and together with all the leveraged use of smart debt, can work together.
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2. Real Estate: Property is 2 for one simple reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income property supplies, it's the trifecta of residual income. To begin with, a house or rental property can enjoy, so capital appreciation is your very first long-term benefit of owning a home.
Other people are paying the mortgage, insurance, property taxes and maintenance at the same time you own this 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 cost of mileage, mortgage interest, and updates to the property.
The fourth and maybe most hidden, however important benefit is that 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 powerful 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, Continue I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for many reasons: a.