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Active income is income for which services 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 very 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. Normally, 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 in the ones that we think will be the toughest to make to the ones that are the easiest to create. Here we go.

7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you've created or sold and put it on a stage that you do not run and then receive compensation based on when the merchandise is bought or utilized. The majority of us do not possess the potential to quickly 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 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. On the other hand, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to make 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 come to be almost its own category. However, it's considerable cost and you have to continuously create and cultivate content and value. The income is residual and combines devotion and education with community.

A fantastic book that explains this version of residual income is The Automatic Customer by John Warrillow. He walks you through, in plain English, the numerous 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 receive it. As a Dad, I tried 3 high chairs prior to 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 fantastic example of this will be Pat Flynn in PassiveIncome.com as 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 important link to residual income. Lets take a peek at a local taco stand. Sure, that taco stand might have loyal patrons and make the best damn beef taco youve ever needed, but they also have to wake up every day 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 go in or not. Sure, I must 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 from their money perpetually.

Why do we call them the Power 2 Because these require less specialization and expertise, and together with the leveraged use of debt that is smart, can operate together.

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2. Real Estate: Property is #2 for one reason, leverage using smart debt and other individuals money. When looking at real estate rents and the potential for income real estate supplies, it's the trifecta of residual income. To begin with, a home or rental house can enjoy, therefore capital appreciation is your first long-term benefit of owning a home.

Other people are paying the mortgage, insurance, property taxes and maintenance at the same time you own that piece of real estate. Third, taxation 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 updates to the home.

The fourth and maybe most hidden, but important benefit is that over time rents grow, protecting your cash-flow against go to this website 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. Most people have 401Ks and IRAs, therefore I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for many reasons: a.