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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 actions. Typically, income from interest on money that's been loaned does not count as portfolio income.
Now, looking at the sources of residual income, we are going to move in the ones which we think will be the toughest to make to the ones that are the easiest to produce. Here we go.
7. Royalties: the creation of audio, 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 get compensation based on when the item is purchased or used. Most of us do not have the potential to quickly create royalty streams.
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This is the purest type of passive residual income, if you can achieve 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 requires a tremendous amount of mental and emotional fortitude to produce residual income potential.
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 come to be almost its own category. However, it has considerable price and you have to continuously make and cultivate content and worth. The income is residual and combines devotion and education with community.
A fantastic book that explains this model of residual income is Your Automatic Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription models and the way to potentially apply them to your business.
4. check out this site Affiliate marketing: Getting paid to tell folks 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 for it to my Amazon account, and someone buys it, then I can earn a commission.
A fantastic illustration of this is Pat Flynn at PassiveIncome.com as he walks through how to establish your own system to maximize 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 take a peek 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 every day and turn the lights on and fire up the grill to get paid 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 make money from their money perpetually.
Why do we call them the Power 2 Because these demand less specialization and experience, and with the leveraged use of debt that is smart, can work together.
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2. Real Estate: Property is 2 for one reason, leverage using smart debt and other peoples money. When looking at real estate rents and the potential for income real estate provides, it's the trifecta of residual income. To begin with, a house or rental house can appreciate, therefore capital appreciation is the very first long-term benefit of owning a house.
Other men and women are paying off 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 real estate by taking a newspaper 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 cash-flow against inflation, although your mortgage interest can be in a fixed rate potentially. .
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1. The final and most effective 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 the investment aspect. Within this, I think our Foundation Freedom resource Phases is by far the simplest, safest and most effective tool for several reasons: a.