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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 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. Normally, income from interest on money that's 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 that are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you have created or sold and place it on a stage that you do not run and then receive compensation based on when the item is purchased or used. Most of us do not have the potential to quickly create royalty streams.
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This is the most straightforward type 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 market solutions. On the other hand, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to make residual income potential.
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 come to be almost its own category. However, it's considerable price and you must continuously make and cultivate content and value. The income is remaining and combines loyalty and education with community.
A fantastic book that explains this model of residual income is The Automatic 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 them where to receive it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now if I blog about the Bumbo and link for it for my Amazon account, and someone buys it, then I can earn a commission.
A fantastic example of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish 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 take a look at a local taco stand. Surethat taco stand might have loyal patrons and make the best damn beef taco youve ever had, but they also have to wake up every day and turn the lights on and fire up the grill to get paid for their special tacos.
So, literally tomorrow I am going to earn a fee if I look these up 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 .
Why do we call them the Power 2 Because these demand less specialization and experience, and with all the leveraged use of smart debt, can work together.
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2. Real Estate: Real estate is 2 for one 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 home or rental house can appreciate, therefore capital appreciation is the very first long-term benefit of owning a house.
Other people are paying off 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 also can depreciate real estate by taking a newspaper 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, but important benefit is that over time rents grow, protecting your cash-flow against inflation, while your mortgage interest can be at a fixed rate potentially. .
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1. The see here final and most powerful type of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so I am going to leave that for the investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most effective check it out tool for many reasons: a.