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Active income is income for which solutions 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 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 actions. Typically, 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 in the ones that we think are 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 sold or created and place it on a platform that you do not run and then receive compensation based on when the item is bought or utilized. The majority of us do not have the potential to rapidly create royalty streams.
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This is the most straightforward form of passive residual income, if you can achieve 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 solutions. 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 must 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 become almost its own category. However, it has considerable cost and you must continuously make and cultivate content and value. The income is remaining and combines loyalty and education with community.
A good book that explains this version of residual income is Your Automatic Customer by John Warrillow. He walks 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 like and showing them where to receive it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now if I blog about the Bumbo and link to it for my Amazon check my site account, and someone buys YOURURL.com it, then I can earn a commission.
A great example of this is Pat Flynn in PassiveIncome.com because he walks you through how to set up your own method to optimize and profit from the 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 steak taco youve ever had, but they also need 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 if I go 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 their money .
Why do we call these the Electricity 2 Because these require less specialization and expertise, 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 reason, leverage using intelligent debt and other peoples money. When looking at property rents and the potential for income real estate provides, see this site it's the trifecta of residual income. To begin with, a house or rental house can appreciate, so capital appreciation is the first long-term benefit of owning a home.
Other men and women are paying the mortgage, insurance, property taxes and maintenance at the same time you own that piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate real estate by taking a newspaper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and updates to the home.
The fourth and possibly most hidden, but important benefit is that over time rents rise, protecting your money against inflation, while your mortgage interest can be in 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. The majority of us have 401Ks and IRAs, therefore I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for many reasons: a.