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So my rich dad said, “In the business world there are Es and E stands for employees. And the employees, you can always tell who they are by their core values. An employee with the president, the generator of the company, will always say the same words. The words are, “I’m looking for a safe, secure job with benefits.” That’s what makes them employees because their core value is security.” Rich Dad’s Cash Flow Quadrant PDF
This text, the follow-up to Rich Dad, Poor Dad reveals why some people work less, earn more, pay less in taxes, and feel more financially secure than others. The author argues that it is simply a matter of knowing which quadrant to work from and when. Rich Dad’s Cash Flow Quadrant PDF
Have you ever wondered: What is the difference between an employee and a business owner?; Why do some investors make money with little risk while most other investors just break even?; Why do most employees go from job to job while others quit their jobs and go on to build business empires?; Why, in the Industrial Age, did most parents want their children to become medical doctors, accountants, or attorneys. and why, in the Information Age, are these professions under financial attack?
Review – Rich Dad’s Cash Flow Quadrant PDF
This book gets your mind on the right track, but doesn’t teach you. Many that buy his books believe they will be taught how to do things. This isnt real education, as he doesnt tell you how to do anything. He just gives concepts like “Find ways to provide income for yourself so that you dont have to work.” DUH, that’s why we have the book. What he really wants is for you to keep buying his books and getting vague concepts, buy his game, and pay for his school. Rich Dad’s Cash Flow Quadrant PDF
He mentions at the end of this book his specialty is marketing… consider that. Also, you’ll realize a lot of the book is him repeating himself b/c he is trying to fill a book, similar to a high school essay that needs to reach a certain amount of pages. Lastly, early in the book he shames people for using financial advisors saying advisors don’t know what they’re talking about… then in the last chapters he admits he has advisors in every category and they play a huge part in his cash flow and business decisions. (eye roll)
Summary of Rich Dad’s Cash Flow Quadrant
THE 20 MOST IMPORTANT INSIGHTS Everyone can be classified as an employee, self-employed, business owner, or investor, depending on how they make money. Each of the four quadrants has its own set of strengths, limitations, and traits.
Employees, or the E-quadrant, place a premium on security and seek the stability of a long-term contract. To make money, this person works within someone else’s system.
The S-quadrant, or self-employed person, does not want their income to be reliant on others. They are likely a diehard perfectionist who values independence and skill, and they essentially own their profession.
The riskiest quadrant is self-employed. Nine out of ten such enterprises fail during the first five years in the United States, owing to a lack of experience and funding. The key to success in this S-quadrant is knowing when to leave and try something new.
The business owner, or B-quadrant, has a system in place where others perform the work for him, such as Henry Ford, who surrounded himself with smart people who knew all the answers so he could focus on new ideas.
The I-quadrant, or Investor, uses money to make money. The I-quadrant is where genuine wealth can be found.
Investors in the E- and S-quadrant stock markets place a premium on diversification. Diversification, on the other hand, is a strategy to avoid losing money rather than a way to earn money, as Warren Buffett suggests. Focusing on a few investments rather than diversity is a superior strategy.
“Wall Street is the only location where folks ride in a Rolls Royce to obtain advise from people who use the subway,” Buffett says. Don’t trust a “expert” with your investment selections.
The safe side of the quadrant is on the right. You don’t have to be concerned about unemployment if you have a safe system that generates income for you.
The key to prosperity is the same as winning Monopoly: purchase four green houses and then trade up for a massive red hotel.
Your mortgage is a burden and a debt that you must pay back, not a valuable asset. Even if you pay off your mortgage, your home remains a liability since it must be maintained and taxes must be paid. Only if a property creates positive cash flow is it considered an asset.
Gold isn’t always the best investment: “Even gold is an asset if you acquire it for less than you sell it for.”
Moving from quadrant E or S into quadrant B, and then into quadrant I, is the best way to achieve financial independence. A financially successful business owner will have the skills, time, and financial resources to support the Investor’s ups and downs.
When you work hard to earn money that you subsequently squander, you don’t become wealthy; instead, you become exhausted. For years, Kiyosaki lived simply and worked hard to accumulate assets rather than pay expenses.
People who are afraid of losing money buy a stock at $20 and then sell it when the price rises to avoid losing what they have acquired. They also stay on when the price drops to $5 in the hopes that it will rise again. The Investor is unconcerned about victories and losses, and will only sell a stock once it has reached its top or has begun to fall.
Write down where you want to be financially one year and five years from now to get started on your path to financial freedom. To illustrate all of your income, expenses, assets, and obligations, create personal income and balance sheet statements.
Set aside $150-$200 per month to pay off credit cards, auto payments, and eventually your mortgage to get rid of your consumer debt. In five to seven years, the majority of people can be debt-free. Put the money you used to pay down your debts into assets that will pay you back.
Make an effort to educate oneself. Read the Wall Street Journal, listen to financial news, read financial websites, periodicals, and newsletters for at least five hours a week, or attend investment and financial education seminars.
Become an expert in a specific problem type. Bill Gates is a software marketing expert who has solved numerous problems. Warren Buffett is a stock market specialist who has addressed numerous challenges. Kiyosaki rose to prominence as an expert in the field of apartment living.
Invest in assets that will give you with long-term or passive income. Begin with little increments, such as Monopoly’s “green houses,” and work your way up to greater stakes.
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SUMMARY The Cashflow Quadrant divides people into four categories based on their source of income: employee, self-employed, business owner, and investor. Owning a business where other people do the job for you or being an investor who utilizes money to earn more money gives you the most freedom. If you shift your mindset about money and risk, you can go from being an employee or self-employed to being a business owner or investor. Make a strategy to take control of your spending and reduce your debts and liabilities. Start saving a tiny bit each month and live within your means. Become financially literate and an expert at fixing a specific company challenge. Concentrate on accumulating assets that will provide you with passive or long-term income. Take small moves in the direction of your objective. Seek for mentors, learn from your mistakes, and have faith in yourself.
WHERE DOES THE CASHFLOW QUADRANT COME FROM? Kiyosaki’s well-educated father advised him to aim for the E or S quadrants when he was younger. However, his father, who spent his whole life in these quadrants, was always destitute. Kiyosaki’s best friend, on the other hand, had a father who was a high school dropout who had made it to the B and I quadrants and was wealthy. This “wealthy father” was the one who explained the Cashflow Quadrant.
The Cashflow Quadrant, at its most basic level, is a system for categorizing people based on where their money comes from: E, S, B, or I.
Employees, or those who work for a living, are represented by the letter E. S is a self-employed someone who works for oneself. B stands for business, and it refers to someone who owns a business or a system that creates revenue. And I’m an investor, which means that I make money from my numerous assets.
We all fall into at least one of these quadrants, and members of each share common features as well as distinct strengths and shortcomings. You can find financial freedom in any of the four quadrants, and you can be rich or impoverished in any of them, but the abilities required in quadrants B and I will help you get there faster.
EMPLOYEE The Employee is concerned about his or her safety above all else. They despise the worry that accompanies economic uncertainty. It doesn’t matter if the employee is a janitor or a CEO; what matters is that they want the security of a long-term contractual commitment. Employees prefer to focus on money rather than possessions, and to acquire that income, they work within someone else’s system.
SELF-EMPLOYED The self-employed individual prefers to be their own boss and does not want to rely on others for their livelihood. They expect to be paid more if they work more, and they are adamant about their financial independence. Unlike the E, the S responds to fear by taking control and doing it themselves, rather than seeking security. The S is a perfectionist who loves independence and being recognized as an expert in their profession. An S is the system that produces money and essentially owns a job.
This is, in many respects, the most dangerous region. Failure is common, and success necessitates working even harder and for longer periods of time. Nine out of ten such enterprises fail during the first five years in the United States, owing to a lack of experience and funding. The clever S sells their firm at the zenith of its performance, before it runs out of steam, to someone with energy and money, then takes the proceeds and starts something new. Knowing when to leave the S quadrant is crucial to success.
OWNER OF A COMPANY Unlike the self-employed person, the business owner prefers to surround themselves with others who will do the work for them. A prime example of a B quadrant is Henry Ford. It’s a well-known anecdote about how several academics condemned Ford, claiming he didn’t know anything. Ford invited them to come up to him and ask him anything they wanted. The intellectuals peppered him with questions. When they were finished, he summoned his most capable assistants to provide the answers. He informed the intellectuals that he employed the brightest people to come up with answers so that he could focus on more essential responsibilities, such as thinking.
The major difference between a S and a B is that a successful B can leave the company for a year and come back to find it still profitable. The B owns or controls a money-making system. Many people feel, for example, that they can produce a better burger than McDonald’s. McDonald’s, on the other hand, isn’t just about the burger; it’s also about the system that produces and serves the burger. Bill Gates did not create a fantastic product; instead, he purchased one and established a powerful global system around it.
INVESTOR With money, the investor makes money. The I quadrant is the rich’s playground, where money is exchanged for wealth. Money works for you in the I quadrant.
Investors of various types
Some investments, such as receiving an education or putting money into a retirement plan, aren’t really appropriate for the I quadrant. The I quadrant, on the other hand, is about assets that create income on a consistent basis throughout your working years. In an ideal world, everyone should invest in the I quadrant, where they can generate more money.
Many people are hesitant to begin investing because they are concerned about taking risks. They want to be safe by putting their money in a bank or entrusting their investments to a professional investment manager. However, the majority of these “experts” are actually employed in the E-quadrant. “Wall Street is the only location where people ride in a Rolls Royce to get advise from folks who use the subway,” Warren Buffett said.
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When you “invest” in a pension plan, you don’t see your money for a long time. Someone in the Investor quadrant does not park their money; instead, they swiftly recuperate it and put it back to work. Many of today’s stock market investors are in the E and S quadrants, who are, by definition, security-oriented and believe in concepts like diversification. “Diversification is a strategy not to lose money, not a way to earn money,” Warren Buffett argues. He believes that focusing on a few investments rather than diversity is a superior strategy.
LIABILITIES AND ASSETS Learning how to handle risk is crucial to becoming a successful investor. You must obtain a financial education in order to invest with your brains rather than your eyes or emotions. Being financially knowledgeable, for example, involves understanding that a mortgage is a liability, a loan that must be paid back. Your mortgage is a bank asset, not a personal asset. Even if you pay off your mortgage, your home is still a liability since it must be maintained and property taxes must be paid. Only if a property creates positive cash flow is it considered an asset.
Any debt is a liability, whereas your savings are an asset. “Even gold is only an asset if you purchase it for less than you sell it for,” Kiyosaki’s Rich Dad tutor put it.
THE BEST WAY TO GO Moving from quadrant E or S into quadrant B, and then into quadrant I, is the best way to achieve financial independence. A financially successful B will have the expertise, time, and resources to help the I through its ups and downs.
Quadrant B’s goal is to own a system and have people manage it for you. There are three major methods for accomplishing this. The classic C-corporation, in which you create your own system, is the first option. The second option is to buy a franchise of an existing system—this can be difficult for someone with an S-mentality who wants to do things their own way, but it is still a good opportunity to learn a lot about running a business. The third option is network marketing, often known as direct distribution marketing, in which you join an existing system. This can be a good method to start investing; just make sure you choose a network marketing company that is focused on teaching and assisting you in your success, as well as one with a solid track record and a strong mentorship program.
CHANGING YOUR IDENTITY The most difficult aspect of moving from the left side of the quadrant, the E and S side, to the right side, the B and I side, is changing your perspective on money.
THE QUADRANT’S DANGEROUS SIDE The quadrant’s left side is the most dangerous. As an E, you are financially reliant on someone else. You are reliant on the opinion of others if you are not financially informed.
The quadrant’s right side is the safe side. You don’t have to worry about losing your job if you have a secure system that generates money for you; if simply want more money, you expand the system and recruit additional people.
PLAY MONOPOLY ONLINE When people ask how he became wealthy, Kiyosaki always responds that he used to play Monopoly as a kid. He learned from the game that the best way to win is to buy four green houses and then upgrade to a massive red hotel. In his life, the same rule applied. When the housing market was weak, the author and his wife acquired as many tiny houses as they could with the money they had. They traded up when the market improved, and today the cash flow from their enormous red hotel, apartment houses, and mini-storage units covers their expenses.
The thing that needs to alter in order to go from the left to the right side of the Cashflow Quadrant is not what you do, but how you think. Working hard to get money to spend on things does not make you wealthy; it simply makes you exhausted. For years, Kiyosaki lived simply, focusing his efforts on accumulating assets rather than paying debts.
When it comes to moving from the left side of the quadrant to the B or I side, Kiyosaki advises starting small with modest green residences, taking their time, and only moving on to big red hotels once they’ve earned some confidence and expertise.
RATIONALIZE YOUR THOUGHTS Money has an emotional component to it. Take a look at the stock market, which is dominated by greed and fear. Stop thinking emotionally about money; don’t focus on how you feel or, more importantly, what you dread. Keep in mind that failure is unavoidable. You’ll eventually stop worrying about failing because you’ll know you can always get back up.
People are especially fearful of losing money, so they will buy a stock for $20 and sell it at $30 to avoid losing their gains; yet, if they had hung on for longer, the stock would have hit $100 or higher. The same folks will stay on to a $20 stock when it falls to $5 in the hopes that the price will rise again.
A winner follows the opposite approach: they sell and take their losses as soon as a stock begins to decline. They stay on to a rising stock until it reaches its peak. To put it another way, the secret to becoming a great investor is to operate logically and remain unaffected by winning or losing.
FINANCIAL SUCCESS IN SEVEN STEPS Kiyosaki highlights the necessity of taking baby steps on the road to financial success: “Before you can run, you have to walk.” However, it’s also crucial to remember Nike’s tagline, “Just do it.” Make a rough sketch of your large goal, then start taking incremental steps toward it while learning as much as you can.
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STEP 1: BE CONCERNED WITH YOUR OWN BUSINESS To begin, create a personal financial statement. Write down your financial goals for the next five years, as well as a shorter-term goal for the coming year. Make sure your objectives are attainable. “In five years, I hope to raise my monthly income from assets to $xx,” for example. I intend to reduce my debts by $xx in a year.”
Make an income statement and a balance sheet for yourself, detailing your current sources of income and spending, as well as all of your assets (savings, investments, real estate, and so on) (mortgage, loans, etc.).
STEP 2: MANAGE YOUR MONEY FLOW Examine your financial statements from Step One. Today, your revenue comes from which sector of the Cashflow Quadrant? In five years, where do you want the majority of it to come from? Make a two-part cash-flow management plan now.
To begin, set away a portion of each paycheck into an investment savings account and don’t touch it until you’re ready to invest.
After that, concentrate on minimizing your consumer debt. Every month, use only one or two credit cards and always pay off new charges. Find a way to make an extra $150-$200 each month and use it toward paying off one of your credit cards. Move on to the next card after you’ve paid off the previous. Accomplish the same with your car and house payments once your consumer debt is paid off—most people can do this in five to seven years. Once you’re debt-free, apply the money you used to pay off your last loan toward investments that will help you expand your asset column.
STEP 3: EDUCATE YOURSELF Understand the difference between a liability and an asset. An asset, at its most basic level, is something that generates cash flow into your wallet; a liability, on the other hand, generates cash flow out of your pocket.
Spend five hours every week reading the business part of your newspaper and the Wall Street Journal, listening to financial news on TV or radio, reading financial websites, periodicals, and newsletters, and attending investing and financial education seminars.
STEP 4: TEACH YOURSELF HOW TO SOLVE PROBLEMS Investors who are financially uninformed search for “experts” to advise them what to invest in, whereas knowledgeable investors specialize in solving a certain sort of problem. Bill Gates, for example, is an expert at resolving software-marketing issues. Warren Buffett is a guru when it comes to resolving business and stock market issues. Kiyosaki and his wife are professionals when it comes to resolving issues with apartment living.
Continue to educate yourself. If you’re looking for apartment dwelling, for example, look for For-Sale signs in your area. Call the agent and inquire about the current rent and maintenance fees, as well as the various financing options available. Calculate the cash-flow statement for each property on a monthly basis. Attend financial lectures and classes once a week, and read investment periodicals. Look into the firms that stockbrokers recommend and consider creating a trading account to make some little investments. Meet with local business brokers to find out what’s for sale. Attend trade shows to learn about franchises and network marketing opportunities in your area.
STEP 5: SEARCH FOR MENTORS Kiyosaki’s Rich Dad tutor instructed him to concentrate on passive income and invest in assets that provide passive or long-term residual income. Remember that most people who give financial advise are in the E or S quadrants themselves, so choose your mentors wisely. People in the investment and business quadrants should be sought out.
STEP 6: LEARN FROM YOUR FAILURES Expect to be disappointed, and have a mentor on hand to assist you if you run into financial difficulties. Be gentle with yourself; if you punish yourself for every setback, you’ll never learn anything new.
Above all, get started! You can’t advance unless you take action—make real estate offers, join a network marketing organization, or invest in a stock you’ve researched. Just remember to take little steps at first and to accept that making mistakes is a necessary part of the learning process.
STEP 7: HAVE FAITH IN YOURSELF. Listen to your worries and doubts, then explore further to uncover the truth. “I’m too exhausted to learn something new,” you could think. “If I don’t learn something new, I’ll be much more fatigued,” the fact is. “If I learn something new, I’ll get thrilled about life again,” says the deeper truth.
Biography of Robert Kiyosaki
Robert Kiyosaki, author of Rich Dad Poor Dad – the international runaway bestseller that has held a top spot on the New York Times bestsellers list for over six years – is an investor, entrepreneur and educator whose perspectives on money and investing fly in the face of conventional wisdom. Rich Dad’s Cash Flow Quadrant PDF
He has, virtually single-handedly, challenged and changed the way tens of millions, around the world, think about money.In communicating his point of view on why ‘old’ advice – get a good job, save money, get out of debt, invest for the long term, and diversify – is ‘bad’ (both obsolete and flawed) advice, Robert has earned a reputation for straight talk, irreverence and courage.
Rich Dad Poor Dad ranks as the longest-running bestseller on all four of the lists that report to Publisher’s Weekly – The New York Times, Business Week, The Wall Street Journal and USA Today – and was named “USA Today’s #1 Money Book” two years in a row. It is the third longest-running ‘how-to’ best seller of all time.Translated into 51 languages and available in 109 countries, the Rich Dad series has sold over 27 million copies worldwide and has dominated best sellers lists across Asia, Australia, South America, Mexico and Europe. Rich Dad’s Cash Flow Quadrant PDF
In 2005, Robert was inducted into Amazon.com Hall of Fame as one of that bookseller’s Top 25 Authors. There are currently 26 books in the Rich Dad series.In 2006 Robert teamed up with Donald Trump to co-author Why We Want You To Be Rich – Two Men – One Message. It debuted at #1 on The New York Times bestsellers list.Robert writes a bi-weekly column – ‘Why the Rich Are Getting Richer’ – for Yahoo! Finance and a monthly column titled ‘Rich Returns’ for Entrepreneur magazine.Prior to writing Rich Dad Poor Dad, Robert created the educational board game CASHFLOW 101 to teach individuals the financial and investment strategies that his rich dad spent years teaching him. Rich Dad’s Cash Flow Quadrant PDF
It was those same strategies that allowed Robert to retire at age 47.Today there are more that 2,100 CASHFLOW Clubs – game groups independent of the Rich Dad Company – in cities throughout the world.Born and raised in Hawaii, Robert Kiyosaki is a fourth-generation Japanese-American. After graduating from college in New York, Robert joined the Marine Corps and served in Vietnam as an officer and helicopter gunship pilot. Following the war, Robert went to work in sales for Xerox Corporation and, in 1977, started a company that brought the first nylon and Velcro ‘surfer wallets’ to market. He founded an international education company in 1985 that taught business and investing to tens of thousands of students throughout the world. In 1994 Robert sold his business and, through his investments, was able to retire at the age of 47. During his short-lived retirement he wrote Rich Dad Poor Dad.
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