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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 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. Typically, income from interest on money that's been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we're going to move in the ones that we think are the most difficult to create to the ones which are the easiest to produce. Here we go.
7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you've created or sold and place it on a platform that you do not run and then get compensation based on when the merchandise is purchased or used. Most of us do not possess the potential to quickly 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 requires 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 These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it's considerable cost and you must continuously make and cultivate content and worth. The income is remaining and combines devotion and education with community.
A good book that explains this model of residual income is The automated 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 seats before finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.
A great illustration of this is Pat Flynn in PassiveIncome.com as he walks through how to establish 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 take a look at a local taco stand. Surethat taco stand might have loyal patrons and also make the best damn steak 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 compensated for their special tacos.
So, literally tomorrow I am going to earn a fee if I move in or not. Sure, I must maintain relationships to keep earning that fee, but truly the income is residual because once I sign up one client I am going to make money from the 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: Property is 2 for one simple reason, leverage using intelligent debt and other peoples money. When looking at real estate rents and the potential for income real estate provides, it is the trifecta of residual income. To begin with, a house or rental property can appreciate, so 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 while you informative post own that piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a newspaper deduction on your annual tax return not to mention expensing the cost 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, although your mortgage interest can be at a fixed rate potentially. .
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1. The final and most powerful form 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 side. Within that, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most powerful tool for several reasons: a.