Robert Kiyosaki's 4 Different Types of Income!
4 Cashflow Quadrants!!!
Today we will be talking about financial independence and
financial freedom as assessed by the financial mentor and Guru - Robert
Kiyosaki. Roberts two books 'Cashflow Quadrant' and 'Rich Dad Poor Dad' are two
fantastic books which I read early on in my ongoing self-develop and education.
What they taught me, I will be writing about below as I write about and explore
with you the four quadrants of financial capital and income.
The four Quadrants.
The Four Quadrants which Kiyosaki explores in many of his
books and products are the:
1. The E-Quadrant.
2. The S-Quadrant.
3. The B-Quadrant.
4. The I-Quadrant.
Exploring the E-Quadrant
The first Quadrant which Kiyosaki talks about, at the top
left hand corner of his model is the E-Quadrant. The E-Quadrant represents
Employed People or Employees who work in a JOB. JOB, which is an acronym for
Just Over Broke represents well over 85% of the global world's population. Here
people work for others and receive a regular income or pay check so that they
can function in society buying and paying for the essentials such as Food,
Water, Gas, Electricity, Housing and Entertainment.
The Benefits and Burdens of the E-Quadrant
* The benefits of this particular quadrant is that if you
find the right job, then it is assumed that you will be financially stable and receive
a regular pay packet. This is of course assuming that you can continue to turn
up at work and your place of employment.
* The burdens of this quadrant is that there are only so
many hours in the day. Also that you can be fired at any time without notice
and that you can be replaced or find yourself without a job rather quickly if
things go pear shaped in your employment. Perhaps this is why it is better for
you to be Self-Employed
Exploring the S-Quadrant
The second Quadrant on the bottom left hand corner of
Kiyosaki's system is the S-Quadrant. This Quadrant represents the Self-employed
person who is either a consultant or the type of person who manages their own
private business and/or income. The person who operates and works in the
S-quadrant has both the freedom and burden of managing their own life and their
own circumstances a.k.a. their future through the use and management of their
own income, labour and resources.
The Benefits and Burdens of the S-Quadrant
* The benefits of this quadrant is that, when a person fully
develops their small business has the opportunity to pay themselves, reduce
their tax and also has the ability to make more money than their employees or
people who are employed in a day job.
* The burdens of this quadrant is time. There is only so
much time in the day and physical energy which can be used as labour in order
to create certain capital required to make them a person of wealth and/or
riches. This is why it is important to develop your small business into a big
business, allowing you to increase your income while leveraging your time.
Exploring the B-Quadrant
The third quadrant, on the top right hand side of Kiyosaki's
system is the B-Quadrant. The B-Quadrant stands for big business and is the
type of business which entrepreneurs, multi-millionaires/billionaires and
people who have evolved their Small businesses or S-Quadrant businesses from
the left to the right side. Here, in the B-Quadrant people are able to leverage
their time and their wealth so that other people can run their business for
them and this allows them to become financially independent and wealthy.
The Benefits and Burdens of the B-Quadrant
* The benefits of this quadrant is that when it is fully set
up the entrepreneur or millionaire can walk away from the business and have
someone else manage this for them. This is real freedom for the individual that
wants to dictate the destiny of their own life.
* The burdens of this quadrant is that like all businesses
including financial institutions and banks, they can be too big to fail (2008
financial crash) and that sometimes, even when leaders walk away from their
businesses and have someone else manage for them - They can still collapse, go
bankrupt or have fraud take place etc. This unfortunately can also affect
investors.
Exploring the I-Quadrant
The fourth and final quadrant at the bottom right hand side
is the I-Quadrant which stands for investor. Investors are the types of people
who have made enough money from the different types of income streams in E-S-B
or from their own previous investments in order to make money over long periods
of time such as through Compound interest (Read Yesterdays Post on Warren Buffett)
or similar methods and to make money work for you, instead of you having to
work for money.
The Benefits and Burdens of the I-Quadrant
* The benefits of this quadrant are the ability to leverage
your time, your money and your circumstances in such a way, if you are
financially intelligent enough to keep increasing your wealth, buy what you
need to survive and to keep increasing your ability to be successful in further
investments.
* The burdens of this quadrant are that you can lose all and
everything and have to start again. That money once worked so hard for in order
to be gained, can be lost. This is the primary difference between each quadrant
in what is lost and what is gained through working within them.
The Primary differences between each quadrant
The differences between each
E-S Quadrants and B-I quadrants is the ability to have time and
financial freedom vs. time and financial expectancy. I.e. You expect to receive
X amount instead of working to have X amount keep coming in, even while you
sleep. An example of this is being an employee or Self-employed and how if and
when you stop working, you stop receiving more money.
Contrast this with owning a big business or being an
investor. In either case this means that as long as you understand, work hard
and learn your craft in business/investment that - Even while you sleep you
will be making ongoing cash, whose potential will only increase as time goes
along with further work and reinvestment.
Investment is important, wherever you fall or find yourself
in your financial education and quadrant. Indeed no matter which quadrant you
find yourself within, just remember you have the ability to change quadrants
and by doing so, change your future.
You can find Kiyosaki's two books at Amazon.com here:
No comments:
Post a Comment