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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 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 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 which we think will be the toughest to create to the ones which are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you've sold or created and put it on a platform that you do not run and then receive compensation based on when the item is purchased or used. Most of us do not have 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 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. However, 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 have to 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 class. However, it has considerable price and you must 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 Your Automatic Customer 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 folks what you like and showing them where to get it. As a Dad, I tried 3 large 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 illustration of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish your own system 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 to residual income. Lets have a peek at a local taco stand. Surethat taco stand may have loyal patrons and also 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 paid for their special tacos.
So, literally I am going to earn a fee whether I go in or not. Sure, I have to maintain relationships to keep earning that commission, but really the income is residual because once I sign up one client I am going to earn money off of the money perpetually.
Why do we call them the Power 2 Because these demand 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 simple 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 enjoy, so capital appreciation is your first long-term benefit of owning a home.
Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time you own this 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 updates to the property.
The fourth and maybe most hidden, however important benefit is that over time rents grow, protecting your money against inflation, although your mortgage interest can be in a fixed rate potentially. .
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1. The final and most powerful type 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 more information the investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.