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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 actions. Typically, income from interest on money that has been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we're going to move from the ones which we think will be the toughest to create to the ones which are the easiest to produce. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand 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 item is bought or used. Most of us do not have the potential to rapidly create royalty streams.
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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 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 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. However, it has considerable cost and you have to continuously make and cultivate content and value. The income is remaining and combines loyalty and education with community.
A good book that explains this model of residual income is Your Automatic Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription models and how 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 large seats before finding the Bumbo. Now if I blog about the Bumbo and link to it for my Amazon account, and someone buys it, I can earn a commission.
A fantastic illustration of this is Pat Flynn at PassiveIncome.com as he walks you through how to set up your own system 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 take a look at a local taco stand. Sure, that taco stand might see this site have loyal patrons and make the best damn beef 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 I am going to earn a fee if I move in or not. Sure, I must maintain relationships to keep earning that commission, but really that the income is residual because once I sign up one client I am going to earn money from the money perpetually.
Why do we call these the Power 2 Because these require less specialization and expertise, and with the leveraged use of smart debt, can work 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 real estate supplies, it is the trifecta of residual income. To begin with, a home or rental property can enjoy, so capital appreciation is your first long-term benefit of owning a home.
Other men and women are paying the mortgage, insurance, property taxes and maintenance at the same time you own that piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the property.
The fourth and maybe most hidden, but important benefit is that over time rents rise, protecting your cash-flow against inflation, while your mortgage interest can be in 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 the investment side. Within this, I think our Foundation Freedom Phases is by far the simplest, you could try these out safest and most powerful tool for several reasons: a.