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Active income is income for which solutions 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 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 actions. Normally, 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 most difficult to make to the ones that are the easiest to produce. Here we go.
7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you've sold or created and put it on a platform that you do not run and then get compensation based on when the item is purchased 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 promote solutions. However, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to produce residual income possible.
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 come to be almost its own category. However, it's considerable price and you must continuously create and cultivate content and worth. The income is remaining and combines devotion and education with community.
A good book that explains this model of residual income is The Automatic 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 folks what you like and showing them where to get it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now when I blog about the Bumbo and link for it to my Amazon account, and someone buys it, I can earn a commission.
A great example of this is Pat Flynn at PassiveIncome.com because he walks through how to establish your own system 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. Sure, that taco stand may have loyal patrons and also make the best damn beef 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 compensated for their particular 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 truly that the income is residual because Web Site once I sign up one client I am going to make money from the money .
Why do we call these the Electricity 2 Because these demand less specialization and experience, and with all the leveraged use of smart debt, can operate 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 real estate rents and the potential for income real estate provides, it is the trifecta of residual income. First, a home or rental property can appreciate, therefore capital appreciation is the first long-term benefit of owning a home.
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 paper 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 rise, 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 form 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 by far the easiest, safest and most effective tool for many reasons: a.