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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. 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 in the ones which we think will be the most difficult to create to the ones that are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've created or sold and place it on a stage that you do not run and then receive compensation based on when the merchandise is purchased or utilized. Most 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 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 products. However, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to produce residual income potential.
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 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 devotion and education with community.
A good book that explains this model of residual income is Your Automatic Client by John Warrillow. He walks 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 folks 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 to it for my Amazon account, and someone buys it, then I can earn a commission.
A great example of this will be Pat Flynn at PassiveIncome.com as he walks through how to set up 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 look at a local taco stand. Surethat taco stand might have loyal patrons and also make the best damn steak taco youve ever had, but they also need to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos.
So, literally tomorrow I am going to earn a fee whether I move in or not. Sure, I must maintain relationships to keep earning that fee, but truly the income is residual because once I sign up one client I am going to earn money from the money .
Why do we call these the Electricity 2 Because these require less specialization and expertise, and with the leveraged use of smart debt, can operate 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 property provides, it's the trifecta of residual income. First, a house or rental house can appreciate, therefore capital appreciation is the first long-term benefit of owning a house.
Other people are paying off the mortgage, insurance, property taxes and maintenance at the same time you own that piece of property. 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 cost of mileage, mortgage interest, and updates to the property.
The fourth and possibly 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 type of residual income, in my check this opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore I am going to leave that for your investment side. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.