If you’ve ever read “Rich Dad, Poor Dad,” then you’ve learned some powerful wealth-building theories published by Robert T. Kiyosaki. What you may not know is that he published a second book that is changing the way we view wealth called “Rich Dad’s Cashflow Quadrant.” If you haven’t had much experience with these theories, then this article is going to tell you how the Rich Dad Poor Dad 4 Quadrants can work for you.
Rich Dad Poor Dad 4 Quadrants – What Are They?
The premise behind Kiyosaki’s Cashflow Quadrants is identifying the different types of people who make up the world of commerce. It is divided into four groups:
- Employee (E)
- Self-Employed (S)
- Business Owner (B)
- Investor (I)
Let’s unpack these groups a little further:
Employee – You have a job.
As an employee, you are paid a wage for your services. You could be an auto mechanic or an emergency room physician. According to Kiyosaki, “A person who comes from the “E” quadrant might say, ‘I am looking for a safe, secure job with good pay and excellent benefits.'”
Self-Employed – You own a job.
If you’re self-employed, you run your own ship. You may set your own hours, but generally, you only get paid when you work. For example, a dentist, web designer, or realtor fits in this category. You may use language like, “My rate is $40 per hour,” or “I’ve put over 25 hours into this project.”
If you own a business and people work under you, then you can earn money without doing all the work. According to Kiyosaki, this quadrant requires great leadership skills. It also requires the ability to face your fear of rejection or failure. Examples of “B” include owning a restaurant franchise, an online business, or a team that markets and produces a product. You might say a phrase like, “I’m in search of a new manager to run my business.”
Investor – Money works for you.
This goes beyond contributing to your 401K. Investing is an active method of making money without constantly having to work for each dollar. For example, you could invest in real estate or in someone else’s business. Kiyosaki says someone in the “I” quadrant might say something like, “Is my cash flow based on an internal rate of return or net rate of return?”
How does the cashflow quadrant lead you to wealth?
Although employment and entrepreneurship are taught by most schools, business ownership and investing (B and I) are less so. Conversely, they are the ultimate wealth-building goals, according to Kiyosaki. Therefore, he implores his readers to shift from the “E” and “S” quadrants to the “B” and “I” side. Reason? Investing is making money while you sleep. Sure it’s riskier, but with proper research, like studying how to move into new quadrants and reading the fine print of investments, you can build greater wealth over time.
When I read “Rich Dad’s Cashflow Quadrant,” I was struck by Rich Dad’s long-standing reason for wanting to be a “B” and “I.” Turns out, it was more than just getting filthy rich or figuring out how to work the system.
Quality time. That’s what he was after. When Rich Dad and Robert T. Kiyosaki applied these principles to their lives, they took risks, but they ultimately became financially free long before retirement. They don’t define “financially free” as debt-free or worry-free. They made enough recurring income to never have to work another day in their lives.
So, what was their why?
- Spending more time with their families.
- Traveling more.
- Doing work they truly care about.
Isn’t that what we’re all after?
Now that you understand the Rich Dad Poor Dad 4 Quadrants, in which one do you fall? Which one would you like to move to?
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