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Active income is income for which services have been performed. This includes wages, tips, wages, 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. 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 are going to move from the ones that we think will be the most difficult to make to the ones which are the easiest to create. Here we go.
7. Royalties: the creation of music, books, inventions, machinesand 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 purchased or utilized. Most of us do not have the potential to quickly 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 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 most and requires a tremendous amount of mental and emotional fortitude to make 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 category. However, it has considerable price and you must continuously make and cultivate content and value. The income is remaining and combines devotion and education with community.
A fantastic book that explains this model of residual income is Your automated Client by John Warrillow. He walks through, in plain English, the various styles of subscription models and the way to potentially apply them to your business.
4. Affiliate marketing: Getting paid to tell folks what you like and showing them where to receive it. As a Dad, I tried 3 high chairs prior to finding the Bumbo. Now if I blog about the Click Here Bumbo and link for it to my Amazon account, and someone buys it, then I can earn a commission.
A fantastic example of this is Pat Flynn at PassiveIncome.com as he walks you 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, click to read 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 paid for their particular tacos.
So, literally I am going to earn a fee if I move in or not. Sure, I have to 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 earn money off of their money .
Why do we call them the Electricity 2 Because these require less specialization and expertise, and together with the leveraged use of smart debt, can work together.
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2. Real Estate: Property is #2 for one reason, leverage using smart debt and other peoples money. When looking at real estate rents and the potential for income property supplies, it is the trifecta of residual income. To begin with, a house or rental house can enjoy, so capital appreciation is the 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 real estate by taking a paper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and updates to the property.
The fourth and possibly most hidden, however important benefit is that over time rents rise, protecting your money against inflation, while 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 that I am going to leave that for the investment side. Within that, I think our Foundation Freedom Phases is by far the easiest, safest and most powerful tool for several reasons: a.