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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 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. Typically, income from interest on money that's been loaned does not count as portfolio income.
Now, looking at the sources of residual income, we are going to move in the ones which we think will be the most difficult to create to the ones that are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machines, patents. A royalty is something you've created or sold and put it on a stage that you do not run and then receive compensation based on when the merchandise is bought or utilized. Most of us do not possess the potential to quickly create royalty streams.
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This is the purest form 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 market 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 Places These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own class. But it has considerable cost and you have to 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 The automated Client by John Warrillow. He walks through, in plain English, the numerous styles of subscription models 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 receive it. As a Dad, I tried 3 large seats prior to 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 fantastic example of this will be Pat Flynn in PassiveIncome.com as he walks through how to establish your own method to maximize 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 peek at a local taco stand. Sure, that taco stand may have loyal patrons and also make the best damn beef taco youve ever had, but they also have to wake up every day and turn the lights on and fire up the grill to get compensated for their particular tacos.
So, literally tomorrow I am going to earn a fee if I go in or not. Sure, I have to maintain relationships to keep earning that fee, but really that the income is residual because once I sign up one client I am going to earn money from their money .
Why do we call them the Power 2 Because these require less specialization and expertise, and together useful content with all 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 property provides, it is the trifecta of residual income. To begin with, a home or rental property can enjoy, so capital appreciation is the very first long-term benefit of owning a home.
Other people are paying off the mortgage, insurance, property taxes and maintenance at the same time you own that piece of real estate. Third, taxation 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 property.
The fourth and maybe most hidden, but important benefit is that over time rents rise, protecting your cash-flow against look at these guys inflation, although your mortgage interest can be at a fixed rate potentially. .
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1. The final and most effective form of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, so that I am going to leave that for your investment aspect. Within that, I think our Foundation Freedom Phases is undoubtedly the easiest, safest and most powerful tool for many reasons: a.