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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 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's been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we are going to move from 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, machines, patents. A royalty is something you've created or sold and put it on a stage that you do not run and then receive compensation based on when the item is purchased or used. The majority of us do not possess the potential to quickly create freshwater flows.
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This is the purest 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. 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 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. But it's considerable price and you have to continuously create and cultivate content and value. The income is remaining and combines loyalty and education with community.
A good book that explains this version of residual income is The Automatic Client 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 people what you like and showing them where to receive it. As a Dad, I tried 3 large chairs prior to 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 will be Pat Flynn in PassiveIncome.com as he walks through how to set up your own system to optimize 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 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 special tacos.
So, literally I am going to earn a fee whether I go in or not. Sure, I must maintain relationships to keep earning that fee, but really that the income is residual because once I sign up one client I am going to earn money off of their money perpetually.
Why do we call these the Electricity 2 Because these demand less specialization and experience, and together with all the leveraged use of smart debt, can operate together.
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2. Real Estate: Property is 2 for one simple reason, leverage using intelligent debt and other peoples money. When looking at property rents and the potential for income real estate supplies, it is 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 home.
Other people are paying off the mortgage, insurance, property taxes and maintenance at the same time you useful content 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 newspaper 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, but important benefit is that over time rents rise, protecting your cash-flow against inflation, although your mortgage interest can be in a fixed rate potentially. .
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1. The final and most effective type of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore that I content am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.