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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 obtained on a regular basis, with very 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. 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're going to move from 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 audio, books, inventions, machinesand patents. A royalty is something you have sold or created and put it on a stage that you do not run and then get compensation based on when the merchandise 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 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. However, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to produce 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it has considerable cost and you have to continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.
A good book that explains this version of residual income is The automated Customer 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 receive it. As a Dad, I tried 3 high chairs prior to finding the Bumbo. Now when I blog about the Bumbo and link to it for my Amazon account, and someone buys it, then I can earn a commission.
A great illustration of this is Pat Flynn at PassiveIncome.com because he walks through how to establish your own system to optimize and profit best site 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 look at a local taco stand. Surethat taco stand may have loyal patrons and make the best damn steak taco youve ever needed, but they also need to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.
So, literally I am going to earn a fee if I go in or not. Sure, I have to maintain relationships to keep earning that fee, but really the income is residual because once I sign up one client I am going to make money off of the money .
Why do we call these the Power 2 Because these demand less specialization and experience, and with the leveraged use of smart debt, can operate together.
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2. Real Estate: image source Property is 2 for one reason, leverage using intelligent debt and other peoples money. When looking at real estate rents and the potential for income real estate provides, it's the trifecta of residual income. First, a home or rental property can enjoy, therefore capital appreciation is your 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 that piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property 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 maybe 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 effective 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 your investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for several reasons: a.