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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 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 resources of residual income, we are going to move in the ones which we think are the most difficult to make to the ones which are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you have sold or created and place it on a stage that you do not run and then get compensation based on when the merchandise is purchased or used. Most of us do not possess the potential to rapidly create freshwater flows.
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This is the most straightforward 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 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 category. However, it's considerable cost and you have to continuously make and cultivate content and value. The income is residual and combines loyalty and education with community.
A fantastic book that explains this version of residual income is Your Automatic Customer by John Warrillow. He walks through, in plain English, the various styles of subscription versions 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 before finding the Bumbo. Now if I blog about the Bumbo and link to it for my Amazon account, and someone buys it, I can earn a commission.
A great illustration of this is Pat Flynn at PassiveIncome.com because he walks you through how to set up your own method to maximize 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 may have loyal patrons and 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 compensated for their special tacos.
So, literally tomorrow 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 really 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 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 real estate provides, it is the trifecta of residual income. First, a house or rental property can appreciate, so capital appreciation is the first long-term benefit of owning a home.
Other people are paying off the mortgage, insurance, property taxes and maintenance while 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 newspaper deduction on your he has a good point annual 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 cash-flow against inflation, while your mortgage interest can be in 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 that I am going to leave that for your investment side. Within that, I think our Foundation Discover More Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.