Robert Kiyosaki invented the Cashflow Quadrant many years ago and introduced it to the world in his book Rich Dad, Poor Dad. The idea revolutionized the way people thought about work, careers and making money. It was an international sensation and opened the eyes of millions of people to the true facts about working and what it means to truly make money work for you.
So what is the Cashflow Quadrant? Basically it’s a teaching guide that shows anyone interested in learning about money the best way to make it, and it has 4 quadrants that explain the 4 different types of earners and the differences between them. These differences are the key to understanding everything about money.
Quadrant E stands for the Employee. The way an employee makes money is by performing their job and collecting a wage or a salary. This, frankly, is the worst way to make money and become wealthy. The reason is that, unless an employee works, they don’t make an income. If they want money they must work and if they want more money they must work more.
S stands for Self Employed and these are people that own their own small business. The biggest problem here is that, similar to E, S people find that in order to earn more they must work more. Many times they end up not owning a business but having a business that owns them.
In fact, many small business owners work more hours for less pay then an employee. Not a great idea for becoming wealthy.
What is the Cashflow Quadrant and Why You need to Be in the B Quadrant
Now we get to the right-hand side, where you can earn significant income!
B, the most important and attainable for the most people, stands for Business Owner. This, in Kiyosaki’s definition, is someone who owns a business that doesn’t need them to actually physically be there every day to run it. With B the person who owns a business makes money off of the work of others, the E people, and is able to develop passive income that is not tied to their daily efforts.
Then there is I, for the Investor. These are the people that use their money to make more money. This is the truly best “Cashflow Quadrant” but also the hardest to break into, which is why I like B the best.
The fact is, MLM and other types of business systems that allow you to make a passive income will give you the free time that you need to truly live your life.
The E and S people may make some money and be able to survive and even put some away but they should strive to be in the B quadrant and, in fact, can do that with some effort and diligence.
Hey, if your Dad gives you a million bucks you can skip right to the I Quadrant but, barring that, most of us will do much better being in the B and it really is attainable if you follow our advice.