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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 little effort required 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 are going to move from the ones that we think will be the toughest to make to the ones which are the easiest to produce. Here we go.
7. Royalties: the creation of audio, books, inventions, machinesand patents. A royalty is something you've created or sold and place it on a stage that you do not run and then receive compensation based on when the merchandise is purchased or used. The majority of us do not have the potential to quickly create royalty streams.
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This is the most straightforward form 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 promote products. On the other hand, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to produce 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. However, it's considerable price and you have to continuously make and cultivate content and value. The income is residual and combines loyalty and education with community.
A good book that explains this model of residual income is The automated Client 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 high chairs before finding the Bumbo. Now when I his comment is here blog about the Bumbo and link for it for my Amazon account, and someone buys it, then I can earn a commission.
A fantastic illustration of this will be Pat Flynn at PassiveIncome.com as he walks you through how to set up your own system 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 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 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 go 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 make money off of the money .
Why do we call them the Electricity 2 Because these require less specialization and experience, and together with all the leveraged use of debt that is smart, can work together.
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2. Real Estate: Property is see this site 2 for one reason, leverage using intelligent debt and other peoples money. When looking at property rents and the potential click for more for income property provides, it's the trifecta of residual income. First, a home or rental house can appreciate, so capital appreciation is the very first long-term benefit of owning a house.
Other people are paying off the mortgage, insurance, property taxes and maintenance while you own this piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate real estate 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 rise, protecting your cash-flow against inflation, although 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, so I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.