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Active income is income for which solutions 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 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 actions. Typically, income from interest on money that has 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 will be the most difficult to make to the ones which are the easiest to produce. Here we go.
7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you have sold or created and place it on a stage that you do not run and then receive compensation based on when the item is bought or utilized. Most of us do not have the potential to rapidly create freshwater flows.
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This is the purest form 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 promote 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 potential.
The effort you must put in is important to consider. .
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5. Subscription Models: Subscription models/Customer Hubs/Member Places These are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own class. However, it has considerable price and you must continuously make 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 automated Customer by John Warrillow. He walks you 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 enjoy and showing them where to get it. As a Dad, I tried 3 large seats before finding the Bumbo. Now when I blog about the Bumbo and link to it to my Amazon account, and someone buys it, then I can earn a commission.
A great illustration of this is Pat Flynn in PassiveIncome.com because he walks you through how to establish your own system 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 visit the site income. Lets have a peek at a local taco stand. Surethat taco stand might have loyal patrons and also make the best damn beef taco youve ever needed, but they also need 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 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 from the money .
Why do we call these the Power 2 Because these require less specialization and expertise, and with the leveraged use of smart debt, can work together.
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2. Real Estate: Property is 2 for one reason, leverage using intelligent debt and other peoples money. When looking hop over to these guys at real estate rents and the potential for income property provides, it is the trifecta of residual income. To begin with, a house or rental house can appreciate, therefore capital appreciation is your first long-term benefit of owning a home.
Other people are paying the mortgage, insurance, property taxes and maintenance while you own that piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the property.
The fourth and possibly most hidden, but important benefit is that over time rents rise, protecting your money against inflation, while your mortgage interest can be in a fixed rate potentially. .
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1. The final and most powerful form of residual income, in my opinion, is investing and insurance. The majority of us have 401Ks and IRAs, therefore that I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for many reasons: a.