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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 actions. 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 that we think are the toughest to create to the ones which are the easiest to produce. Here we go.
7. Royalties: the creation of music, 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 receive compensation based on when the merchandise is purchased or utilized. The majority 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 attain 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 promote products. On the other hand, the industry as a whole is confusing to most and requires 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 All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it has considerable price and you have to continuously create and cultivate content and value. The income is residual 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 you 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 folks what you like and showing them where to get it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now when I blog about the Bumbo and link for it for my Amazon account, and someone buys it, I can earn a commission.
A great illustration of this will be Pat Flynn in PassiveIncome.com because he walks you through how to set up your own system to maximize 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 look at a local taco stand. Surethat taco stand might have loyal patrons and also make the best damn steak taco youve ever needed, but they also have to wake up each day and turn the lights on and fire up the grill to get paid for their particular tacos.
So, literally tomorrow I am going to earn a fee if I move in or not. Sure, I have to maintain relationships to keep earning that commission, but truly that the income is residual because once I sign up one client I am going to earn money from the money .
Why do we call these the Electricity 2 Because these demand less specialization and expertise, and with the leveraged use of debt that is smart, can operate together.
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2. Real Estate: Real estate is #2 for one reason, leverage using intelligent debt and other individuals money. When looking at property rents and the potential for income property supplies, it is the trifecta of residual income. First, a house or rental house can appreciate, therefore capital appreciation is your very first long-term benefit of owning a house.
Other men and women are paying off 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 also can depreciate real estate by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and updates to the property.
The fourth and maybe most hidden, however 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 helpful site opinion, is investing and insurance. Most people have 401Ks and IRAs, so I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.