Cash Flow Quadrant

In the world we live in today there are only 4 legal ways to make an income! In this video by Robert Kiyosaki he explains these four different ways. On the left side of the quadrant you have the employee and the self-employed section. 90% of North America’s population fall under this category. The other 10% makes up the right side of the quadrant, which are owning a business and becoming an investor.

We start off in the employee section. What this means is you rent your time out to someone else in exchange for a paycheck. While most people like the security of becoming an employee there is usually no room to grow or advance. The other major factors include no control of your time and paycheck. As we move down a quadrant into the self-employed section you have taken control of your job and you now own the position. There are many respectable careers that fall under this quadrant for example; a doctor, dentist, lawyer, real-estate agent. These professionals now own their jobs. The problem with this quadrant is although they might have control over their income they have to be working in order to get a paycheck. They do not have a system or other people working for them. Which means the more money they want to make the more time they have to put in.

This brings us over to the right side of the quadrant. The top right quadrant would be owning a business system where you have other people working for you, which creates a residual or passive income. This is how you create a wealth machine! If you look McDonald’s for example they have created the ultimate business system where they literally have a team of teenagers running the business and the owner is no where to be found. (Now remember I am talking about the business system not the food!) The problem with owning a McDonald’s is it costs about $1.2 million.

The Last quadrant is the investor quadrant. This is ultimately the most rewarding quadrant to be in. This means you have enough money invested that your money is going to work for you! Now that’s what I’m sure you like to hear. If you are in this quadrant you are enjoying complete freedom due to financial independence. What most people don’t realize is that eventually one day we all have to end up in this quadrant. There will be a day in everybody’s lifetime where they become physically unable or to old to work. At this point we better have enough money saved that we can live off it for the rest of our lives. Especially now with more and more companies getting rid of their pension plans, not to mention some companies can’t even afford to pay the pensions they already have in place.

Now you are aware on how people make an income the million-dollar question is what side of the quadrant do you want to be on?


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