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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 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'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 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've created or sold and put it on a stage that you do not run and then receive compensation based on when the item 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 type 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 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 possible.
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 become almost its own class. But it's considerable cost and you must continuously create and cultivate content and worth. The income is remaining and combines loyalty and education with community.
A good book that explains this model of residual income is Your Automatic Customer 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 folks what you like and showing them where to receive 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 to my Amazon account, and someone buys it, then I can earn a commission.
A fantastic illustration of this is Pat Flynn at PassiveIncome.com because he walks you through how to set up your own method to maximize and profit from your try this 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. Surethat taco stand may have loyal patrons and also make the best damn beef 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 special 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 truly that the income is residual because once I sign up one client I am going to make money off of their money perpetually.
Why do we call these the Power 2 Because these require less specialization and expertise, and with the her explanation leveraged use of smart debt, can work together.
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2. Real Estate: Property is 2 for one reason, leverage using smart debt and other individuals money. When looking at property rents and the potential for income real estate supplies, it's the trifecta of residual income. To begin with, a house or rental house can appreciate, therefore capital appreciation is the very first long-term benefit of owning a house.
Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the property.
The fourth and possibly most hidden, but important benefit is that over time rents grow, protecting your cash-flow against inflation, although your mortgage interest can be in 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. The majority of us 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 effective tool for many reasons: a.