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A couple of years ago (maybe 10 or more) I’ve started to learn finances. After some reading and searching people advised me to check Robert Kiyosaki’s books. The most famous is of course “Rich Dad Poor Dad”, but for me (and millions of people) the most important is: “Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom”. Right now you can find audio books, so you should definitely check them out!
The main part of the book is teaching how CashFlow Quadrant looks like and what it really means.I’ve red Robert’s books when I studied at college. First book, I remember – “Rich Dad Poor Dad“ – I’ve red almost all pages in one night. This was the perfect book and perfect time for me. I was so excited to read Robert’s words. I’ve searched advises how to get my life going into a good direction. That time I’ve studied and I was my own boss (me and my brother – we created 2 companies – Brostudio and graf.IT, both in IT business). My friends says, that it’s impossible to study and have a company., and we never make it. We prove them wrong. It’s just “how much you can take and keep moving forward”.
What Does the Cashflow Quadrant Teach?
Identifying where you are in this Cash-flow Quadrant can largely be determined by where most of your income comes from. What affects which quadrant we decide to generate our income from is a due to internal differences in our core values, interests, outlook, life stage etc.
The basic principle in “Rich Dad’s Cashflow Quadrant:“ is to categorize all possibilities to work into 4 types:
- Employee (E) – has a job. Wants safety. Example: engineer, IT specialist, operator.
- Self-Employed (S) – owns a job. Wants independence. Example: doctor, lawyer.
- Business Owner (B) – owns a business system. Create wealth. Example: McDonald, Burger King, IBM, Apple…
- Investor (I) – makes money work for them. Creates financial freedom. Example: Warren Buffet.
Which side of the Cashflow Quadrant are you on?
Every quadrant is clearly written in Robert’s books and over the Internet. In this post you will find my thoughts about the topic.
The Rules has Changed.
Traditional schooling teaches us to become an Employee (E) or Self-Employed(S). This is not good or bad – this is average. You cannot be financially free being average. In my opinion you can’t achieve your potential working for someone. The biggest problem occurs, when you aren’t working (accident, broken leg, problem with the machine you operate and so on). When something happens and you lost your you, you earn nothing. That,s why being on E and S side is not the best idea.
To Be or not to Be?
I started as Self-Employed. I thought that was perfect for me (“If you want something done right, do it yourself.“) – and it works fine to me for some time. The time – where I was alone and my only responsibilities were cleaning, going to school and do some little stuffs – was perfect. But no matter what I’ve done, I couldn’t make enough money to live without stress. I’ve found a quote: “Most self-employed people quit their 9-5 to work 9-9 (or worse)“. Then I’ve red Robert books and I started to realize, that this is the worst quadrant we could possibly be. When you look at the facts you can see clearly, that S-guys have multiple bosses, difficult tasks requires much time to finish and you need to cover all costs by yourself. So maybe I was earning OK for a student, but I’ve often staid late and work at night.
When you are in E or S side, you need to step outside your comfort zone. That was OK for me, because I have family to support me and I have had some saved money to have second chance, when my plan will be a total disaster. Today I know that changing a mindset from S to I was the best idea. I still stay at E side, because I’m in the process of creating passive income. My intent is to quit my job this year.
The problem we’ve all face is lack of financial experience and knowledge. We can all change that, it often requires a fundamental shift in ones core values. You “should” needs to be changed for “MUST”. The attainment of financial freedom requires a high level of financial intelligence.People in general, are afraid to take risk, so they stay at E and S quadrant entire life. Safety cannot provide you financial freedom. I think that in 20-30 years won’t provide you food also. You need to change your state now.
Be ready to move beyond job security.
This road is hard, because you don’t have experience. After some time you will start to realize that B and I side are easy, but you need to be careful and always calculate the risk. Take your chance. This could be the best year of your life. Try to change your normal, boring life and start to be in B and I quadrant (build passive income).
Please remember that you will step out of your comfort zone.Once you have crossed the side of the quadrant, there is generally no turning back. Always remember that in this side you need to have solid experience and financial intelligence. For example, 80% of businesses start-ups aren’t last more than 5 years. Have in mind that many successful “B’s” have lost their money in the “I” quadrant.
In summary, the rules of the game are totally different in each quadrant. To be successful you need to change not only your state, but also dictionary mindsets, tools, skills and behavior. You don’t need to switch back from left to right side. Please take time to learn as much you can and prepare everything. When you are ready, don’t hold back and jump into the B and / or I side.
We can actually earn income from each of these 4 quadrants simultaneously. Please remember that most of your income will likely come from one quadrant. If you develop skills to be famous athlete, soccer player, tennis champion, you can easily stay at E or S quadrant. This is reserved for amazing individuals. But when you are a normal person, like me and most of us, we definitely need to switch to B and I side.
Cashflow Quadrant - Audio Book Part 1
Cashflow Quadrant - Audio Book Part 2
Cashflow Quadrant - Audio Book Part 3
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