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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 required 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 has been loaned does not count as portfolio income.
Now, looking at the sources of residual income, we're going to move in the ones that we think will be the toughest to make to the ones which are the easiest to create. Here we go.
7. Royalties: the creation of audio, 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 get compensation based on when the item is bought or used. The majority of us do not possess the potential to rapidly create royalty streams.
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This is the most straightforward form 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 market solutions. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to make residual income possible.
The effort you have to 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 class. However, it's considerable price 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 version of residual income is The Automatic Client 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 like 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 great example of this will be Pat Flynn at PassiveIncome.com because he walks through how to set up your own method to maximize 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 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 each day and turn the lights on and fire up the grill to get paid for their special tacos.
So, literally I am going to earn a fee whether I move 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 make money off of the money perpetually.
Why do we call them the Power 2 Because these require less specialization and expertise, and together with all the leveraged use of smart debt, can work together.
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2. Real Estate: Property is #2 for one reason, leverage using intelligent debt and other peoples money. When looking at property rents and the potential for income property provides, it's the trifecta of residual income. First, a home or rental house can appreciate, therefore capital appreciation is the first long-term benefit of owning a house.
Other men and women are paying the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you 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, however important benefit is that over time rents grow, protecting your money 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. The majority of us have 401Ks and IRAs, so that I am going to leave that for your investment side. Within that, I review think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective tool for several reasons: a.