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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 has been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we are going to move from the ones that we think are the most difficult to make to the ones that 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 put it on a platform that you do not run and then receive compensation based on when the merchandise is purchased or used. The majority of us do not have the potential to quickly create royalty streams.
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This is the most straightforward type 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 promote solutions. On the other hand, 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 Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. However, it has considerable price and you must continuously make and cultivate content and value. The income is residual and combines devotion and education with community.
A fantastic book that explains this model of residual income is The automated Customer by John Warrillow. He walks through, in plain English, the various 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 get it. As a Dad, I tried 3 large chairs before finding the Bumbo. Now when 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 set up your own method 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 might have loyal patrons and make the best damn steak taco youve ever had, but they also need to wake up each day and turn the lights on and fire up the grill to get compensated for their particular tacos.
So, literally I am going to earn a fee if I move in or not. Sure, I must maintain relationships to keep earning that commission, but truly the income is residual because once I sign up one client I am going to make money off of their money .
Why do we call them the Power 2 Because these require less specialization and experience, and together with all 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 intelligent 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 property can enjoy, therefore capital appreciation is the first long-term benefit of owning a home.
Other men and women are paying 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 Resources than ordinary income and you also can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the cost of why not try this out mileage, mortgage interest, and updates to the home.
The fourth and maybe most hidden, but important benefit is that over time rents grow, protecting your money against inflation, although your mortgage interest can be at a fixed rate potentially. .
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1. The final and most effective form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, so that I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for many reasons: a.