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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 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 has been loaned does not count as portfolio income.
Now, looking at the sources of residual income, we are going to move from the ones which we think will be 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, machinesand patents. A royalty is something you've sold or created and place it on a stage that you do not run and then receive compensation based on when the merchandise is bought or used. The majority of us do not possess the potential to rapidly create freshwater flows.
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This is the purest form 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 promote solutions. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to make 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. However, it has considerable cost and you have to continuously create and cultivate content and worth. The income is residual and combines loyalty and education with community.
A fantastic book that explains this model of residual income is Your Automatic Client 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 people what you like and showing them where to receive it. As a Dad, I tried 3 large seats before finding the Bumbo. Now when I blog about the Bumbo and link to it to my Amazon account, and someone buys it, I can earn a commission.
A great example of this is Pat Flynn in PassiveIncome.com as he walks through how to establish your own system 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 look at a local taco stand. Surethat taco stand may have loyal patrons and make the best damn steak taco youve her response ever needed, 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 if I go 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 make money from their money .
Why do we call them the Electricity 2 Because these require less specialization and expertise, and together 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 supplies, it is the trifecta of residual income. To begin with, a house or rental property can enjoy, therefore capital appreciation is your very first long-term benefit of owning a house.
Other people are paying off 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 real estate by taking a newspaper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the property.
The fourth and maybe most hidden, but important benefit is that over time rents grow, protecting your cash-flow against inflation, while 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 opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore that I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for many reasons: a.