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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 received 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 are going to move in the ones that we think are the most difficult to make to the ones that are the easiest to produce. Here we go.
7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you've sold or created and place it on a platform that you do not run and then get 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 most straightforward form 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 promote products. However, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to make residual income potential.
The effort you must 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 come to be almost its own category. However, it's considerable cost and you must continuously make and cultivate content and worth. The income is remaining and combines devotion and education with community.
A good book that explains this version of residual income is Your 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 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 when I blog about redirected here the Bumbo and link for it for my Amazon account, and someone buys it, then I can earn a commission.
A fantastic illustration 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 have a peek at a local taco stand. Sure, that taco stand may have loyal patrons and make the best damn beef 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 particular tacos.
So, literally tomorrow I am going to earn a fee if I go in or not. Sure, I must maintain relationships to keep earning that fee, but really the income is residual because once I sign up one client I am going to earn money off of their money .
Why do we call these the Electricity 2 Because these require less specialization and experience, and with all 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 smart debt and other individuals 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 house can enjoy, therefore capital appreciation is your very first long-term benefit of owning a house.
Other men and women are paying off the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you 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 updates to the property.
The fourth and maybe most hidden, but important benefit is that over time rents rise, protecting your cash-flow against inflation, while your mortgage interest can be in 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. Most people have 401Ks and IRAs, so I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.