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Active income is income for which services 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 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 activity. 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 which we think are the most difficult to make to the ones which are the easiest to create. Here we go.
7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have created or sold and put it on a platform that you do not run and then receive compensation based on when the merchandise is bought or utilized. Most of us do not have the potential to quickly create freshwater flows.
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This is the purest type of passive residual income, if you can achieve 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 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 potential.
The effort you must put in is important to consider. .
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5. Subscription Models: Subscription models/Customer Hubs/Member Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it's considerable cost and you must continuously create and cultivate content and value. The income is remaining and combines devotion and education with community.
A good book that explains this model of residual income is Your automated Customer by John Warrillow. He walks you through, in plain English, the numerous styles of subscription versions and how to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell people what you enjoy and showing them where to receive it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now if I blog about the Bumbo and link for it for my Amazon account, and someone buys it, I can earn a commission.
A great example of this is Pat Flynn at PassiveIncome.com as he walks through how to set up 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. Sure, that taco stand might have loyal patrons and make the best damn beef taco youve ever needed, but they also need to wake up each 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 whether I go in or not. Sure, I have to maintain relationships to keep earning that fee, but really that the income is residual because once I sign up one client I am going to make money from the money .
Why do we call them the Power 2 Because these demand less specialization and expertise, and with the leveraged use of smart debt, can work together.
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2. Real Estate: Property is why not try these out 2 for one reason, leverage using intelligent debt and other individuals money. When looking at real estate rents and the potential for income real estate provides, it's 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 home.
Other click to find out more people are paying off the mortgage, insurance, property taxes and maintenance while you own that piece of real estate. 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 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 money against inflation, while 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. 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 easiest, safest and most powerful tool for many reasons: a.