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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 activity. Normally, income from interest on money that has been loaned does not count as portfolio income.
Now, looking at the resources of residual income, we are going to move from the ones that we think are the most difficult to make to the ones that are the easiest to produce. Here we go.
7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you've sold or created and place it on a stage that you do not run and then get compensation based on when the item is purchased or utilized. Most 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 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 promote 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. But it has considerable cost and you must continuously make and cultivate content and worth. The income is residual and combines devotion and education with community.
A good book that explains this version of residual income is Your Automatic Customer by John Warrillow. He walks you 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 people what you enjoy 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 to my Amazon account, and someone buys it, then I can earn a commission.
A great illustration of this will be Pat Flynn in PassiveIncome.com because he walks through how to set up your own method 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 take a look 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 need to wake up every 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 go 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 earn money from the home money perpetually.
Why do we call them the Electricity 2 Because these demand less specialization and experience, and with all the leveraged use of debt that is smart, can operate together.
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2. Real Estate: Property is 2 for one reason, leverage using intelligent debt and other individuals money. When looking at property rents and the potential for income property supplies, it's the trifecta of residual income. To begin with, a house or rental house can enjoy, therefore capital appreciation is the first long-term benefit of owning a home.
Other people are paying the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, taxation protection. great post to read Rental income is taxed at a lower rate than ordinary income and you also can depreciate real estate by taking a paper deduction on your annual tax return not to mention expensing the cost of mileage, mortgage interest, and upgrades to the home.
The fourth and maybe most hidden, but important benefit is that over time rents grow, protecting your money against inflation, although your mortgage interest can be at 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. The majority of us have 401Ks and IRAs, so I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for many reasons: a.