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Active income is income for which solutions 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 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. Normally, 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 that we think are the toughest to create to the ones that are the easiest to create. Here we go.
7. Royalties: the creation of audio, books, inventions, machines, patents. A royalty is something you have created or sold and place it on a stage that you do not run and then receive compensation based on when the merchandise is bought or used. The majority of us do not possess the potential to rapidly create freshwater flows.
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This is the most straightforward form 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 solutions. However, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to make residual income possible.
The effort you have to put in is important to consider. .
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5. Subscription Models: Subscription models/Customer Hubs/Member Areas All these are businesses like Netflix, Costco, Sams Club. The subscription model has become almost its own category. However, it's considerable cost and you must continuously make and cultivate content and worth. The income is remaining and combines loyalty and education with community.
A good book that explains this model of residual income is Your 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 like and showing them where to receive it. As a Dad, I tried 3 high chairs before 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 is Pat Flynn at PassiveIncome.com as he walks through how to establish your own method to optimize and profit from the passion.
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3. read this 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. Surethat taco stand might have loyal patrons and make the best damn steak 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 paid for their particular 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 fee, but really the income is residual because once I sign up one client I am going to make money from their money .
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 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 property provides, it's the trifecta of residual income. First, a house or rental house can appreciate, so capital appreciation is the very first long-term benefit of owning a house.
Other people are paying off the mortgage, insurance, property taxes and maintenance at the same time you own this piece of real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a newspaper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the home.
The fourth and possibly most hidden, but important benefit is that over time rents rise, 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 type of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for many reasons: a.