The Cash Flow Quadrant by Robert Kiyosaki Summary in English
did you ever hear this while growing up. Just go to school get good grades. you can get a secure and well-paid job. I bet that 95% of you have been raised to believe that. This is the road to financial success. I know that I was and this path might be the most suitable for some people but definitely not for everyone in rich dad’s cash flow quadrant.
Robert Kiyosaki explains that there are four different paths to become wealthy but some of them are more efficient than others.
The cash flow quadrant explained by robert kiyosaki
the cash flow quadrant is a simple model that explains that wealth can come from four different
sources. Which quadrant you belong to depends on where most of your income comes from. The four different quadrants are The employees, , The small business owner or self-employed and the investor.
The employee strives for security he achieves financial success by climbing the corporate ladder. You might find him say something like I’m looking for a secure job with nice colleagues. There are great benefits the small business owner or self-employed on the other hand strives for control he achieves financial success by becoming highly specialized in a demanding field. The big business owner strives for freedom financial success by creating a profitable business system. Te investor also strives for freedom but he does this through allocating money to where it has the highest expected return.
Difference between the left side of the cash flow quadrant and the right side is OPT and OPM. OPT stands for other people’s time at OPM for other people’s money. A person from the B quadrant uses OPT and OPM. He is designing a business system where he can hire people from the E and S Quadrants by using money from people of the AIl quadrant.
He also invests a lot of his own time to kick-start the business but in the long run. This is not essential and becoming a more passive owner of the business is possible. A person from the I quadrant uses OPT to generate income from his money alone. If he’s skilled enough he can apply other people’s money as well as his own money.
To scale his investment profits he realized the big difference people from the E and S quadrants. Never get to use OPT or OPM. Therefore the more successful they become in their quadrants the more money they make but at the same time their workload increases takeaway number.
The pros and cons of the cash-flow quadrants
E the Employee pros reduced financial uncertainty paid vacation health insurance and other benefits and colleagues cons success means more work and less free time. Your performance is often higher than your salary. Especially bosses S the small business owner or self-employed pros you are your own boss you’re paid according to performance.
Success means more work and less free time and financial. You might lose money on this be the big business owner pros opt and OPM financial freedom can be achieved very quickly and a greater portion of your profits goes to you. In other words you pay less tax cons financial uncertainty you might lose money. It requires a different set of skills than what school teaches and you’ll have to manage people I the investor pros opt and OPM financial freedom can be achieved quickly a greater portion of your profits goes to you.
In other words, it can be passive cons financial uncertainty. You might lose money takeaway number for breaking the addiction moving to the right side. So there are pros and cons with all the quadrants but the right side is where financial freedom can be achieved the fastest.
how can we move to this side:
money has an addictive power much like sex or drugs. Therefore when you earn money through a specific quadrant you’ll be addicted to that quadrant. If you earn money as an employee for a large company for instance your brain will associate that type of work with a cash reward switching from one quadrant to another becomes more difficult because of this moreover if you’ve been raised in a family where degrees, job security, paid vacation and governmental pension has been highly valued you might have a difficult transition to make.
here are some potential mental obstacles for the conversion aren’t your taking too many risks you might fail money can’t buy happiness anyways as if this wasn’t enough our educational system is built so that it rewards those who make the least number of mistakes and punishes those who make the most in the B and I quadrants. You must act in the complete opposite way people who take action will also make the most mistakes but in the long run these people will learn more and achieve more.
as business owners and/or investors Thomas Edison was criticized for making one thousand and fourteen mistakes before creating the electric light bulb in response he said I did not fail 1014 times I successfully found out what did not work 1014 times. A great start is to surround yourself with people who have made the journey before and learn from those that are already successful in B and I quadrants
According to Robert Kiyosaki there are 5 different levels of investors starting from the bottom we have one the series financial intelligence level at this level we have the people who have nothing to invest at all each month the expenses are higher than their income often because they forget to pay themselves first which is the most fundamental strategy for wealth building taught in the classic the richest man in Babylon to the savers are losers level placing hard-earned money under a mattress or in a low-interest bank.
account will put you in the top 50% of people financially but that doesn’t mean that it’s a solid personal finance plan why because of inflation between 1980 and 2017 the value of the Swedish crown was reduced by 69 %. For instance the I’m too busy level a lot of people are simply too busy with their careers family friends and vacations to dedicate time to invest in their therefore hand over their money to someone else to do it. The problem with this approach is that such a person will never learn how to invest for the I’m a professional level this is the do it yourself investor. he uses his own money and takes his own decisions. he is educating himself in the subject but hasn’t evolved to the last level yet as you are watching this channel I expected you already are at this level or higher or that your intentions are to get here.
The capitalist level this is an investor who comes from the B quadrant and has learned how to use the concepts from there in his investing
for example he is not investing alone he has advisers that help him gather information about the markets and in that using opt. furthermore he uses OPM as well as his own money he has also learned how to use corporations to reduce taxation levels of his capital gains the level 5 investor is the person who will reach financial freedom first among all of the investors what level of investor are you
summery of cashflow
there are four different roads to financial success you may succeed as the employee these self-employed the business owner and the investor the right side of the cash flow quadrant uses opt and OPM there are pros and cons with each of the quadrants and depending on your personality and goals in life one might be more suitable than the others. if you wish to move to the B & I quadrants you must learn to accept risks make mistakes and surround yourself with others that have achieved what you wish to do.