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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 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. Typically, income from interest on money that has been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we're going to move from the ones which we think are the toughest to create to the ones which are the easiest to produce. 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 platform that you do not run and then get compensation based on when the merchandise is purchased or utilized. The majority of us do not possess the potential to rapidly create royalty streams.
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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 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 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 Areas These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. But it's considerable price and you have to continuously make and cultivate content and value. The income is remaining and combines loyalty and education with community.
A fantastic book that explains this model of residual income is The automated Customer by John Warrillow. He walks 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 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 to it for my Amazon account, and someone buys it, then I can earn a commission.
A fantastic illustration of this is Pat Flynn at PassiveIncome.com because he walks through how to set up 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 look at a local taco stand. Sure, that taco stand may have loyal patrons and also make the best damn beef taco youve ever needed, but they also need to wake up each day and turn the lights on and fire up the grill to get compensated for their particular tacos.
So, literally I am going to earn a fee if I move in or not. Sure, I must maintain relationships to keep earning that commission, but really that the income is residual because once I sign up one client I am going to earn money from the money .
Why do we call these the Power 2 Because these require less specialization and expertise, and with the leveraged use of smart debt, can work together.
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2. Real Estate: Real estate is 2 for one reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income property provides, it's the trifecta of residual income. To begin with, a house or rental house can appreciate, therefore capital appreciation is your first long-term benefit of owning a home.
Other men and women are paying the mortgage, insurance, property taxes and maintenance while find more info you own this piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property by taking a paper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and updates to the property.
The fourth and possibly most hidden, but important benefit is that browse around here over time rents grow, 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 powerful form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so I am going to leave that for your investment side. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most effective tool for several reasons: a.