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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 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. Typically, 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 from the ones which we think are the most difficult to make to the ones that are the easiest to create. Here we go.
7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you've sold or created and put it on a platform that you do not run and then receive compensation based on when the merchandise 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 achieve 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 demands a tremendous amount of mental and emotional fortitude to produce residual income potential.
The effort you must 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 has considerable price and you must continuously make and cultivate content and value. The income is remaining and combines devotion and education with community.
A good book that explains this model of residual income is Your Automatic Client by John Warrillow. He walks you through, in plain English, the various styles of subscription versions and how to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell people what you enjoy and showing them where to get it. As a Dad, I tried 3 high seats before finding the Bumbo. Now if I blog about the Bumbo and link for it to my Amazon account, and someone buys it, I can earn a commission.
A fantastic example of this is Pat Flynn in PassiveIncome.com because he walks you through how to set up your own method to optimize and profit from your 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 also make the best damn steak 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 move in or not. Sure, I must maintain relationships to keep earning that fee, but truly the income is residual because once I sign up one client I am going to earn money off of the money perpetually.
Why do we call these the Electricity 2 Because these demand less specialization and experience, and with the leveraged use of smart debt, can work together.
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2. Real Estate: Real estate is #2 for one simple reason, leverage using intelligent debt and other peoples money. When looking at property our website rents and the potential for income property provides, it's the trifecta of residual income. First, a home or rental property can enjoy, so capital appreciation is your very 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 this piece of property. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property by taking a paper deduction on your annual advice tax return not to mention expensing the price of mileage, mortgage interest, and updates to the home.
The fourth and maybe 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 effective 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 this, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for many reasons: a.