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Active income is income for which solutions 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 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 resources of residual income, we are going to move in the ones which 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 have created or sold and put it on a stage that you do not run and then receive compensation based on when the merchandise is purchased or used. Most of us do not have the potential to rapidly create freshwater flows.
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This is the most straightforward type of passive residual income, if you can achieve 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 market products. On the other hand, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to produce 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 Places 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 have to continuously make and cultivate content and worth. The income is remaining and combines devotion and education with community.
A fantastic book that explains this version of residual income is The Automatic Client 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 get it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now when I blog about visit the site the Bumbo and link to it to my Amazon account, and someone buys it, then I can earn a commission.
A fantastic example of this will be Pat Flynn in PassiveIncome.com because he walks through how to establish your own method 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 have a peek at a local taco stand. Sure, that taco stand might 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 special tacos.
So, literally tomorrow I am going to earn a fee whether I go in or not. Sure, I must maintain relationships to keep earning that commission, but really that the income is residual because once I sign up one client I am going to earn money off of the money .
Why do we call them the Electricity 2 Because these demand less specialization and expertise, and with the leveraged use of debt that is smart, can work together.
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2. Real Estate: Real estate is #2 for one reason, leverage using smart 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. To begin with, a house or rental house can enjoy, therefore capital appreciation is your very first long-term benefit of owning a home.
Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own that piece of property. 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 upgrades to the home.
The fourth and possibly most hidden, however 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 effective type of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so that I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.