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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 actions. Typically, 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 from the ones which 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, machines, patents. A royalty is something you've created or sold and place it on a platform that you do not run and then receive compensation based on when the merchandise is bought or used. Most of us do not possess the potential to quickly 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 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 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 class. But it's considerable cost and you must continuously create and cultivate content and value. The income is remaining and combines loyalty and education with community.
A fantastic book that explains this model of residual income is Your automated Customer by John Warrillow. He walks through, in plain English, the numerous styles of subscription models 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 large seats before finding the Bumbo. Now when I blog about the Bumbo and link to it for my Amazon account, and someone buys it, then I can earn a commission.
A fantastic illustration of this is Pat Flynn in PassiveIncome.com because he walks you through how to set up your own system to optimize 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 peek at a local taco stand. Surethat taco stand might have loyal patrons and also 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 particular tacos.
So, literally 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 the income is residual because once I sign up one client I am going to earn money from their money perpetually.
Why do we call them the Electricity 2 Because these require less specialization and expertise, and with all 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 smart debt and other individuals money. When looking at property rents and the potential for income company website real estate provides, it's Resources the trifecta of residual income. To begin with, a house or rental property can enjoy, so capital appreciation is your first long-term benefit of owning a house.
Other men and women are paying the mortgage, insurance, property taxes and maintenance at the same time you own this piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you 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 updates to the home.
The fourth and possibly most hidden, however 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 type of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore that I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.