Residual Income In South Africa - Passive Residual Income Fundamentals Explained
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 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're going to move from the ones which we think will be the toughest to make 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've sold or created and place it on a platform that you do not run and then receive compensation based on when the merchandise is bought or utilized. The majority 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 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 products. On the other hand, the industry as a whole is confusing to many and demands a tremendous amount of mental and emotional fortitude to make 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 Areas All 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 create and cultivate content and value. The income is remaining 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 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 folks what you enjoy and showing them where to receive it. As a Dad, I tried 3 high seats prior to finding the Bumbo. Now when 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 example of this will be Pat Flynn at PassiveIncome.com because he walks through how to establish your own method to optimize and profit from the passion.
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3. Business: As he has a good point 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 might have loyal patrons and make the best damn steak taco youve ever had, 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 go in or not. Sure, I must maintain relationships to keep earning that commission, but truly that 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 these the Electricity 2 Because these require less specialization and expertise, and with all the leveraged use of debt that is smart, can work together.
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2. Real Estate: Real estate is #2 for one simple reason, leverage using smart debt and other peoples money. When looking at real estate rents and the potential for income real estate supplies, it is the trifecta of residual income. First, a home or rental property can appreciate, so capital appreciation is the first long-term benefit of owning a home.
Other people are paying the mortgage, insurance, property taxes and maintenance at the same time 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 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 property.
The fourth and possibly most hidden, but important benefit is that over time rents rise, protecting your cash-flow against inflation, while 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. The majority of us have 401Ks and IRAs, therefore I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.