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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 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. Typically, income from interest on money that's been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we're going to move from the ones that we think are the toughest to make to the ones that are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've sold or created and place it on a stage that you do not run and then receive compensation based on when the item is purchased or used. The majority of us do not possess the potential to rapidly create freshwater flows.
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This is the purest type 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. On the other hand, 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 have to 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 become almost its own category. But it's considerable price and you have to continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.
A good book that explains this model of residual income is Your automated 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 like and showing them where to get it. As a Dad, I tried 3 high chairs before finding the Bumbo. Now if I blog about the Bumbo and link to it for 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 set up 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 have a look at a local taco stand. Surethat taco stand may have loyal patrons and make the best damn steak taco youve ever needed, but they also need to wake up every day home and turn the lights on and fire up the grill to get compensated for their special 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 fee, but truly that the income is residual because once I sign up one client I am going to earn money off of their money .
Why do we call them the Power 2 Because these demand less specialization and expertise, and with all 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 smart debt and other peoples money. When looking at real estate rents and the potential for income property supplies, it's the trifecta of residual income. First, a home or rental property can enjoy, therefore capital appreciation is your first long-term benefit of owning a home.
Other people are paying off the mortgage, insurance, property taxes and maintenance at the same time you own this 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 newspaper deduction on your annual tax return 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 grow, 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, therefore I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool you could try this out for several reasons: a.