Do you want to know how the cash flow quadrant is made up and what you have to do to stop working for money and get your money to work for you?
If so, read on to the end of the article as we have a surprise for you that you are sure to be interested in.
✅ What is the ROBERT KIYOSAKI money Flow Quadrant?
The money flow quadrant is a concept coined by Robert Kiyosaki in his book “The Money Flow Quadrant: The Rich Father’s Guide to Financial Freedom,” although it is a recurring idea in all of his other books such as “Rich Father Poor Father” (you can find our summary of the book here) and “The Business of the 21st Century.
The money flow quadrant consists of a diagram that allows us to understand the 4 ways that exist to earn money and generate income.
As its name suggests, the quadrant is divided into 4 parts, which we will identify as E (employee; top left), A (autonomous; bottom left), D (owner; top right) and I (investor; bottom right).
✅ Summary of the money Flow Quadrant
In the world, there are millions of people who live a day with what they get from their jobs. But others live very well, thanks to their knowledge of how money works.
The money flow quadrant is a graphical representation made by Kiyosaki to divide people according to how they get their money.
The left side is made up of employees and self-employed, the right side is made up of entrepreneurs and investors.
◉ E: Employees
In the upper left part of the quadrant are the employees: they make up the majority of the population.
People in this category exchange their time and effort for money. Therefore, if they don’t work, they don’t get paid, with a few exceptions such as annual leave and sick leave.
Their income does not depend on the profit of the company for which they work. Therefore, they are always paid the same, and their earnings are linear, since they depend only on the time they work. In addition, wage increases are small and infrequent.
People in this category are looking for security. People are looking for an ideally indefinite employment contract, trusting that it will give them security. Security in terms of the income they will receive at the end of the month, and security of knowing that they will have a job in the next few years.<>
Therefore, they don’t mind sacrificing their time for their salary because they believe that their job gives them security, although we have already seen that during the crisis of little security this type of contracts served since many people suffered reductions in their salaries and many others were dismissed and unfortunately are still unemployed today. It is therefore a false security.
In addition, these people often sacrifice a lifetime of effort for a salary that always seems insufficient and less than they deserve, and they can only fully enjoy life when they retire at 65 or even 67 years old.
◉ A: The self-employed
The second category of persons are the self-employed, who are located in the lower left part of the quadrant.
They are self-employed, such as liberal professions (lawyers, doctors, etc.). These people attach great importance to their independence and autonomy, so they prefer to be their own bosses and not depend on other people’s orders.
Like the first category (employees), they exchange their time for money. However, they do not have the same security since every month their income fluctuates depending on the work they have done that month. Therefore, if they do not work, they do not earn money.
In addition, they have little social protection in the event of illness or disability, the pensions they can aspire to do not reflect the work they have done for so many decades and, if that were not enough, the tax treatment they receive is often very unfavourable.
Therefore, although their incomes may be higher than those of employees, as a whole they are no better off than people in the previous category.
◉ D: Business owners
At the top right of the money quadrant found to business owners. It is, therefore, about entrepreneurs.
They are people who have put in place systems to generate cash flows that are not dependent on their work, and they also hire other people to do the work for them. Therefore, they receive income even if they are not working.
The people in this quadrant are not necessarily those who have had better grades at school, but they know that it is important to recruit people who are more competent than they are. Therefore, they surround themselves with excellent employees to whom they delegate the most.
What characterizes these people is their leadership and their willingness to take risk in exchange for greater cash flow.
Unlike the self-employed, they do not work for your company, but your company works for them.
◉ I: Investors
The last category of people that make up the money flow quadrant are the investors, who are at the bottom right of the quadrant.
What characterizes investors is that they find solutions to make their money work for them. Therefore, they do not work as such, but devote their time to analyze investment opportunities so that they offer them a high return in exchange for their money. In other words, they invest their money to make even more money.
These people have a high level of financial intelligence, so they use their money, and sometimes even the money of others, to create their own wealth. One example is using the leverage effect to finance the purchase of a flat. Investors use the money from the bank to acquire the property, and then it is the tenant, by paying the monthly rent, who returns the loan to the bank. Investors end up owning real estate without having to invest their own money, and they also receive passive and recurring income every month.
✅ Opinion on the money Flow Quadrant
Now that we have seen the 4 categories of people that make up the cash flow quadrant, we can make a number of general observations about the quadrant.
The vast majority of the population is located on the left side of the quadrant.
About 95%. On the other hand, these people only hold 5% of total wealth. In addition, incomes are linear, so if these people want to earn more they must work more hours, with the natural limit of 24 hours a day, which means that their incomes are capped.
On the right side, on the other hand, we find the remaining 5% of the population.
These people, however, hold 95% of the wealth. Their incomes are not only passive because their assets work for them, but they are also exponential and have no limit. Therefore, the people in this part of the quadrant are getting richer every day.
To the left of the quadrant you have to make a choice between time or money. It is not possible to have both.
On the other hand, to the right of the quadrant we have time and money. Therefore, if you are on this side of the quadrant you can achieve financial freedom after a certain amount of time if you do things properly.
Therefore, if you are currently on the left side of the quadrant, you should invest in assets (whether physical, technological or financial) that allow you to make the leap to the right side of the quadrant.
You may not want to be a multimillionaire, but you do want to be able to manage your own time on your own and not depend on other people for it.
You will be able to dedicate more time to your family, to your passions and to enjoy life without time or geographical restrictions.
For our part, we want to help you make the leap to the right side of the quandary.
For this we have prepared an eBook totally free where we explain 4 ways to generate passive income.
In other words, we explain you different ways to be an investor and have your money work for you.
To receive it, you simply have to leave your name and e-mail address here and we will send it to you by e-mail immediately.
✅ Conclusion on the money Flow Quadrant
Finally, we would like to ask you a question: what part of the quadrant are you currently in?
And which one would you like to be in 5 years? Tell us in the comments below.
You can also ask us any questions you have about the money flow quadrant in the comments.
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Thank you very much in advance and see you in the next article.
Until then, we wish you a very happy investment.