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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. Normally, income from interest on money that's 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 audio, books, inventions, machines, patents. A royalty is something you've sold or created and put it on a stage that you do not run and then receive compensation based on when the item is purchased or used. Most 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 achieve 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 market 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 must 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 category. But it has considerable price and you have to continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.
A good book that explains this version of residual income is Your automated Customer by John Warrillow. He walks you through, in plain English, the various styles of subscription models and how to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell look these up folks what you enjoy and showing them where to get it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now if I blog about the Bumbo and link to it for my Amazon account, and someone buys it, then I can earn a commission.
A fantastic example of this is Pat Flynn in PassiveIncome.com because he walks you through how to set up your own method to optimize 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 have a look at a local taco stand. Sure, that taco stand might have loyal patrons and also 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 paid for their special 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 make money from their money perpetually.
Why do we call them the Power 2 Because these demand less specialization and experience, and together 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 simple reason, leverage using smart 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 home or rental property can enjoy, therefore capital appreciation is the very 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 real estate. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also can depreciate property by taking a newspaper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the home.
The fourth and possibly 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 form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore 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.