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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 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 activity. 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're going to move in the ones which we think are the toughest to create 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 have created or sold and place it on a stage that you do not run and then get compensation based on when the item is bought 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. However, the industry as a whole is confusing to many and demands 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 cost and you have to continuously create and cultivate content and worth. The income is residual and combines devotion and education with community.
A good book that explains this version of residual income is The automated Customer by John Warrillow. He walks through, in plain English, the numerous 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 get it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now when 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 in PassiveIncome.com as he walks you through how to establish your own system to optimize and profit from your passion.
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3. Business: their explanation As I mentioned, not all businesses are created equal when it comes to residual income. Lets take a peek at a local taco stand. Surethat taco stand may have loyal patrons and also 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 special 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 demand less specialization and expertise, and together 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 smart 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. To begin with, a house or rental house can appreciate, so capital appreciation is your very first long-term benefit of owning a home.
Other men and women are paying off 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 real estate by taking a newspaper deduction on your annual tax return additional hints 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 at a fixed rate potentially. .
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1. The final and most powerful type of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so that I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.