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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 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. Normally, income from interest on money that has been loaned does not count as portfolio income.
Now, looking at the sources of residual income, we're 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 audio, books, inventions, machines, patents. A royalty is something you have sold or created and put it on a stage that you do not run and then get compensation based on when the merchandise is bought or utilized. Most of us do not have the potential to quickly create freshwater flows.
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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 promote solutions. On the other hand, the industry as a whole is confusing to many and requires a tremendous amount of mental and emotional fortitude to make residual income potential.
The effort you must 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 become almost its own class. However, it's considerable price and you must continuously make and cultivate content and worth. The income is residual and combines loyalty and education with community.
A fantastic book that explains this version of residual income is Your automated 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 people what you like and showing them where to receive it. As a Dad, I tried 3 large chairs prior to finding the Bumbo. Now when 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 will be Pat Flynn in PassiveIncome.com as he walks you 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 have a look at a local taco stand. Surethat taco stand may have loyal patrons and make the best damn beef 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 special tacos.
So, literally tomorrow I am going to earn a fee whether I go in or not. Sure, I must maintain relationships to keep earning that commission, but really that the income is residual because once I sign up one client I am going to make money off of the money perpetually.
Why do we call these the Electricity 2 Because these demand less specialization and experience, and together with the leveraged use of smart debt, can work 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 real estate rents and the potential for income real estate provides, it is the trifecta of residual income. First, a home or rental property can enjoy, so capital appreciation is your very first long-term benefit of owning a house.
Other people are paying the mortgage, insurance, property taxes and maintenance while you own this piece of property. Third, tax protection. Rental income is taxed at a lower rate than ordinary income and you also 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 home.
The fourth and maybe 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 form of residual income, in my opinion, is investing and insurance. The majority why not look here of us have 401Ks and IRAs, therefore that I am going to leave that for the investment aspect. Within this, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for many reasons: a.