On Becoming Rich - Book review: Rich Dad's Cashflow Quadrant

The Cashflow Quadrant

It is one of Robert Kiyosaki's most used graphics. It is simple, but once you really understand it, you will never look at the myth of "rich and poor" again in the same light.

Robert Kiyosaki continues on his quest to financially educate people. It is really hard to stop being poor when you don't have any of the tools you need to become rich. And not only have you not been taught about these tools, you are often programmed to believe in tools that will forever leave you poor.

How you are living your life. The very language you use. The people you associate with. These are all defining your future net worth. And most people don't even know it.

So here is an interesting break down of four general classes of people and how they relate to money.

The cashflow quadrant separates people into four areas.
E - Employee
S - Specialist
B - Big Business (more than 100 employees)
I - Investor

The people in each of these areas has a different mindset and a completely different vocabulary. (imagine that, your vocabulary limiting your economic success)

The employee thinks about trading their time for money. More time equals more money. So the way to get ahead is obviously work as long as you can. But, this ends in disaster, because our bodies cannot work endlessly.

So, with their point of view, the boss is getting paid more for less work. They feel used. They resent making money so they guy at the top can have "the life style". They only see outer trappings and do not have any notion of what it really takes to run a business. They are trapped in their cubicle.

And since they only see the trappings of wealth, they get themselves even more stuck in the rat-race by mortgaging to the hilt. They spend before the earn. And they pay their creditors before they pay themselves.

Their motto is I just have to work harder

The specialist is a person who has found their way out of the cubicle farm, but are still very much stuck in the rat-race.

They have found an ability and developed it so that they can sell it. They are a one man army. They believe if anything is going to get done right, you have to do it yourself. These people work really efficiently. However, if they ever stop working, to take a break, a vacation or suffer an illness, their income stops.

Their motto is I just have to work smarter

The Big Business person is someone who has started a company that is large enough that it can run on its own. It used to be that this was about 100 employees in size. Now it has changed quite a lot with companies that will manufacture and drop ship for you. Now you can have the 100 employees without having any employees.

The business person is out finding needs / wants that need to be filled and filling them.

Their motto is How do i get better employees?

The Investor... everyone knows what an investor is, or thinks they do.

An investor finds investments. Projects where he can put his money and expect more money back in the future.
Drilling oil wells or lending money to a company developing electric automobiles. One could invest in rental real estate. Long gone are the days where you just had to put your money in the stock market and sit back.

But these people's one characteristic is that the search for things that will give off more money then they put into it.

There motto is Make money work for you

Now that you understand there are different points of view about money, you can begin changing how you think, which changes the words you use. Which changes how you relate to money. Which changes how much money comes to your pocket.

You progress from an Employee to a Specialist to a Business owner and / or Investor. We can't make a jump from E all the way to B in one go. There is a lot of unlearning and a lot of skills you need to master. Take smaller steps, but always walk towards your goals.

This isn't a trivial exercise. It is a reprogramming of your wet-ware. It is making a change in your life in a big way.

Or, in other terms: The Employee buys lottery tickets. The Investor thinks, why would i buy a lottery ticket, i have a much better places to put that money with a higher rate of return.

Rich Dad's Cashflow Quadrant is available at Amazon Books. (there are several editions, many used books and a kindle version)
https://www.amazon.com/Rich-Dads-CASHFLOW-Quadrant-Financial/dp/1612680054/ref=sr_1_1?ie=UTF8&qid=1523648361&sr=8-1&keywords=the+cashflow+quadrant

Image in this post are my own original creation based on Robert Kiyosaki's diagram.
Book Cover copyright ® 1998, 2012 by Robert Kiyosaki