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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 obtained 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're going to move in the ones which we think will be the toughest to create to the ones that are the easiest to create. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand 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 bought or utilized. Most of us do not possess the potential to quickly create royalty streams.

 

 

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This is the most straightforward type 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 solutions. However, 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 Places All these are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. However, it has considerable cost and you have to continuously create 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 Your automated Client by John Warrillow. He walks you through, in plain English, the numerous styles of subscription models and how to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell folks wikipedia reference what you like and showing them where to receive it. As a Dad, I tried 3 high seats before finding the Bumbo. Now when I blog about the Bumbo and link for 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 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 take a peek at a local taco stand. Surethat taco stand might have loyal patrons and make the best damn beef taco youve ever had, but they also need to wake up every day and turn the lights on and fire up the grill to get check this paid for their special tacos.

So, literally tomorrow I am going to earn a fee if I move in or not. Sure, I must maintain relationships to keep earning that commission, but truly the income is residual because once I sign up one client I am going to earn money from the money perpetually.

Why do we call them the Electricity 2 Because these require less specialization and experience, 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 reason, leverage using smart debt and other peoples money. When looking at property rents and the potential for income real estate provides, it's the trifecta of residual income. First, a house or rental property can enjoy, so capital appreciation is the very first long-term benefit of owning a home.

Other men and women 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 cost of mileage, mortgage interest, and updates to the property.

The fourth and maybe most hidden, however important benefit is that over time rents grow, protecting your money 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 the investment side. Within that, I think our Foundation Freedom Phases is undoubtedly the simplest, safest and most effective tool for many reasons: a.

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