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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 received on a regular basis, with very 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 activity. 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're going to move in the ones that we think are the toughest to make 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 place it on a platform that you do not run and then receive compensation based on when the merchandise is bought or used. Most of us do not have the potential to rapidly create royalty streams.
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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 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 potential.
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 category. But it's considerable cost and you must continuously create and cultivate content and value. The income is remaining and combines devotion and education with community.
A fantastic book that explains this version of residual income is Your automated Customer by John Warrillow. He walks through, in plain English, the numerous styles of subscription versions and the way 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 to my Amazon account, and someone buys it, I can earn a commission.
A great example of this is Pat Flynn at PassiveIncome.com because 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 look at a local taco stand. Surethat taco stand may have loyal patrons and also 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 compensated 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 truly the income is residual because once I sign up one client I am going to make money from their money .
Why do we call these the Power 2 Because these demand less specialization and expertise, and together with the leveraged use of smart debt, can work together.
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2. Real Estate: Real estate is #2 for one simple reason, leverage using intelligent debt and other peoples money. When looking at property rents and the potential for income property provides, it is the trifecta of residual income. First, a house or rental house can appreciate, so capital appreciation is the very 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 this 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 property.
The fourth and maybe 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 form 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 side. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most why not find out more effective tool for many reasons: a.