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Active income is income for which services have been performed. This includes wages, tips, salaries, 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 sources of residual income, we are going to move from the ones which 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 platform that you do not run and then get compensation based on when the item is purchased or utilized. The majority of us do not have the potential to quickly create freshwater flows.
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This is the most straightforward form of passive residual income, if you can attain it. .
6. Network Marketing: Network marketing is a unique business model and has made 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 products. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to produce 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 All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it's considerable cost and you have to continuously create and cultivate content and value. The income is remaining and combines devotion and education with learn this here now community.
A good book that explains this version of residual income is Your automated Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription models and the way to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell people what you like and showing More Bonuses them where to receive it. As a Dad, I tried 3 high chairs before finding the Bumbo. Now if I blog about the Bumbo and link to it to my Amazon account, and someone buys it, then I can earn a commission.
A try here fantastic illustration of this will be Pat Flynn at PassiveIncome.com because he walks through how to establish your own method 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 may have loyal patrons and make the best damn beef taco youve ever had, but they also have to wake up each day and turn the lights on and fire up the grill to get paid for their particular tacos.
So, literally I am going to earn a fee if I move in or not. Sure, I have to 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 make money off of the money perpetually.
Why do we call them the Electricity 2 Because these demand less specialization and expertise, and together with the leveraged use of smart debt, can operate together.
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2. Real Estate: Real estate is #2 for one simple reason, leverage using intelligent debt and other individuals money. When looking at property rents and the potential for income real estate supplies, it's the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is your very 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, taxation 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 upgrades to the home.
The fourth and maybe most hidden, but important benefit is that over time rents rise, 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 type of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, so I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most effective tool for many reasons: a.