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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 are going to move in 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, machines, patents. A royalty is something you have created or sold and put it on a stage that you do not run and then get compensation based on when the merchandise is bought or utilized. The majority of us do not possess the potential to rapidly 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 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 solutions. On the other hand, the industry as a whole is confusing to most and demands a tremendous amount of mental and emotional fortitude to produce 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 class. However, it has considerable cost and you have to continuously create and cultivate content and worth. The income is remaining and combines loyalty and education with community.
A good book that explains this version of residual income is Your Automatic Client by John Warrillow. He walks you 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 people what you enjoy and showing them where to get it. As a Dad, I tried 3 large seats before finding the Bumbo. Now if I blog about the Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.
A great illustration of this is Pat Flynn in PassiveIncome.com because he walks through how to set up your own method 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. Sure, that taco stand might have loyal patrons and make the best damn beef taco youve ever needed, but they also have to wake up each day and turn the lights on and fire up the grill to get compensated for their special tacos.
So, literally tomorrow I am going to earn a fee whether I move in or not. Sure, I must 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 their money .
Why do we call them the Electricity 2 Because these require less specialization and expertise, and together with all the leveraged use of smart debt, 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 provides, it is the trifecta of residual income. First, a house or rental property can appreciate, therefore capital appreciation is the first long-term benefit of owning a house.
Other men and women are paying 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 can depreciate real estate by taking a paper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the home.
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 at 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 that, I think our Foundation Freedom site web Phases is by far the simplest, safest and most powerful tool for many reasons: a.