Cashflow Quadrant

November 10, 2007

Lately I’ve been talking with a lot of people about the Cashflow Quadrant.  This is a discussed in a book by Robert Kiyosaki and Sharon Lechter of Rich Dad, Poor Dad fame.

If you aren’t aware of it, it looks like this…

Poor and middle class people work on the left hand side as an “E” (employee) or an “S” (self-employed).  All of these people sell their time for money.  Because we only have fixed allotment of time our income is also limited.

Rich people live on the right hand side of the quadrant.  ”B” is for business and refers to business owners who leverage their time by utilizing the resources around them including having employees.  

The difference between the ”B” and the “S” is that the self-employed person puts more energy into running things themselves and taking care of the operations part of the business.  A “B” quadrant person sets up systems and hires people to run his businesses.  This frees them up to build more assets.

What if Sam Walton had to be at the store every night closing out the registers?  If so, there would be one small store in Bentonville, AR instead of the mega business it is today.

The last is “I”. This stands for investment.  Rich people are looking for assets - things that bring them money rather than costing them money. Investments are a way to do that. This can include real estate, the stock market, and more. 

Part of rethinking wealth is looking at life in a different way.  If you think opening your own business is the way to freedom, you are right - as long as you run it the right way. 

It all goes back to the old adage “Work smart, not hard” 

 Here’s to your journey,
Deborah

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