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Active income is income for which services 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. Typically, income from interest on money that's been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we are going to move from the ones which we think are the toughest to create to the ones which are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you have 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 used. The majority of us do not have the potential to rapidly 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 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 promote products. On the other hand, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to make residual income possible.
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 class. However, it's considerable price and you have to continuously make and cultivate content and value. The income is remaining and combines loyalty and education with community.
A fantastic book that explains this model of residual income is The automated Client 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 enjoy and showing them where to get it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now if I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.
A fantastic example of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish 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 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 compensated for their particular tacos.
So, literally I am going to earn a fee whether I go in or not. Sure, I must maintain relationships to keep earning that fee, but truly the income is residual because once I sign up one client I am going to make money from the money perpetually.
Why do we call them 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 simple reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income real estate provides, it's the trifecta of residual income. First, a house or rental property can appreciate, therefore capital appreciation is the very first long-term benefit of owning a house.
Other people 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 also can depreciate real estate by taking a paper deduction on your annual tax return not to mention expensing the price check out this site of mileage, mortgage interest, and upgrades to the property.
The fourth and possibly most hidden, but important benefit is that over time rents rise, protecting your money against inflation, although your mortgage interest can be at 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, so I am going to leave that for the investment side. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for many reasons: a.