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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 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 has been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we are going to move in 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 music, 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 item is purchased or utilized. The majority of us do not possess the potential to quickly create royalty streams.
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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 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. However, 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 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 become almost its own class. However, it's considerable price and you have to continuously create and cultivate content and value. The income is residual and combines loyalty and education with community.
A fantastic book that explains this model of residual income is The Automatic Customer by John Warrillow. He walks through, in plain English, the various 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 More hints to get it. As a Dad, I tried 3 large seats before finding the Bumbo. Now if 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 example of this is Pat Flynn in PassiveIncome.com because he walks you through how to establish your own method 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 peek at a local taco stand. Surethat taco stand may have loyal patrons and make the best damn steak taco youve ever needed, but they also have to wake up every day and turn the lights on and fire up the grill to get compensated for their particular tacos.
So, literally tomorrow I am going to earn a fee if I go in or not. Sure, I must 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 earn money off of their money .
Why do we call them the Power 2 Because these require less specialization and experience, and 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 smart debt and other peoples money. When looking at property rents and the potential for income property supplies, it's the trifecta of residual income. First, a home or rental house can appreciate, therefore capital appreciation is your very first long-term benefit of owning a house.
Other people are paying the mortgage, insurance, property taxes and maintenance while 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 upgrades to the home.
The fourth and possibly most hidden, however important benefit is that over time rents grow, protecting your money against inflation, although your mortgage interest can be at a fixed rate click here for more info potentially. .
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1. The final and most effective 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 undoubtedly the simplest, safest and most powerful tool for several reasons: a.