Robert Kiyosaki’s Remarkable Financial Teachings and the Cashflow Quadrant

There are two books that Dave recommend that Nicky and his other daughter Lexi should read when she they were teenagers. They are important to read before entering to workforce and then again before investing. They are both written by Robert T. Kiyosaki and go hand-in-hand together. The first one is “Rich Dad, Poor Dad” and the second is “Cashflow Quadrant”.

“Rich Dad, Poor Dad” changed our perspective on how to earn money and in addition “Cashflow Quadrant” helped to solidify it. “Rich Dad Poor Dad” helped us to unlearn everything we learned from traditional education which trained us how to be an employee. We learn’t that the only way to really become wealthy is by having our money work for us rather than the work for our money.

In “Cashflow Quadrant” Kiyosaki teaches the four ways people make money: Employee, Self Employed, Business Owner, and Investor. We both have dabbled in all these Quadrants.

The biggest take away that we got from this book when we first read it was that we needed to move from the left side of the quadrant to the right side of the quadrant as fast as possible to become wealthy.

Our below summary of Cashflow Quadrant will help you to understand passive income and jump start you down the path to quit your job.

Where are you in Kiyosaki’s Cashflow Quadrant?

The left side of the Cashflow Quadrant: E’s and S’s

Employee –Desires job security, a steady paycheck, no financial risk, and the benefits provided by their jobs (retirement, insurance, time off, sick days, etc.). Sense of entitlement is high with the employee and they trade hours for dollars. They also pays the highest tax rate.

Sole Proprietor – Is their own boss and not be dependent upon other people for their financial security. These include doctors, lawyers, and anyone who is self-employed. They desire independence and tend to be controlling, not trusting others to do the work as good as they can. Their income is tied directly to how much they work and if they do not work, they don’t get paid. They basically “own” a job.

Right side of the Cashflow Quadrant: B’s and I’s

Business Owner – Starts businesses and hires employees to delegate as much as possible. While they work “on” the business, they find competent people to work “in” the business. They desire to create a business that can run on its own without them. Business owner’s focus on creating systems to make money without them.

Investor –Looks for ways to make their money, as well as the money of others work for them. They desire to work less so they can spend their time however they want while not being tied down to a job. Escapes high taxes by deferring their taxes to a future date or utilizes the IRS rules to pay the lowest tax rate of all the other groups. They receive at least 70% of their income from investments and less than 30% from a job.

If you want to be rich, you should jump to the B and I side of the quadrant ASAP

The rich focus the majority of their efforts on the Business and Investor side of the Cashflow Quadrant because that is where the real wealth and money is.

The benefits of the Business and Investor side of the Cashflow Quadrant are:

• Every dollar you invest is another employee working for you who makes more employees who do the same.
• Income comes in whether they work 60 hours a week or just 1 hour.
• Financial freedom for yourself and your family.
• Complete control over everything because they own the corporations.
• Not dependented on anyone for your lifestyle or freedom.
• Once your income from investments surpass your wages you can then retire.
• Not dependent on Social Security, 401K, IRA, or the Pension.

The good news is, if you are starting in the Employee category you can move to any of the other quadrants at any given time. It is entirely possible to move from E to I very quickly.

Get your copy of both Rich Dad, Poor Dad and Rich Dad’s Cashflow Quadrant by Robert Kiyosaki.

Start reading and apply the strategies learn’t.

Talk Soon,
Nicky and Dave