In his book, Rich Dad’s Cash Flow Quadrant – Guide to Financial Freedom, Robert T Kiyosaki describes the Cash Flow Quadrant as a way of categorizing people based on where their money comes from. I would recommend the book to anyone who wishes to change their financial destiny.
Robert T Kiyosaki identifies four groups into which people fall according to how they earn their income. The four groups are represented respectively by the letters, E, S, B and I where E stands for Employee, S represents people that are Self-Employed, B is for Business Owners and I stands for Investors. The diagram on the right summarizes aspects of the Cash Flow Quadrant.
The significance of the Cash Flow Quadrant is that it has a bearing on the theme of our blog, Lifestyle Design and the quest for true financial freedom, because, although it is possible for people in each group to earn a lot of money, it is only the people in the B and I groups that are able to enjoy true time, financial and location freedom. This is because people in these two groups are in the main not tied down by their jobs. They enjoy “passive income” which means that their money works to earn income for them even when they are not present, as compared with the employee or self-employed groups who generally have to be present in order to get paid. The vast majority of people are in the E and S categories and if you are one of those people and you want true financial freedom, then your objective is to move yourself into the Business Owner and Investor groups on the right side of the Cash Flow Quadrant.
The Success Mindset
Now, moving from the left to the right side of the Cash Flow Quadrant is not easy because it requires a shift in thinking. If we define successful people as those that occupy the right side of the quadrant, then we find that these people have certain characteristics or a view of the world that sets them apart from the majority of the population. It is these traits that enable them to enjoy the success not seen by people on the employee side of the quadrant. I call this the Success Mindset because these traits reflect the self-belief systems of successful people. A few of these traits are listed below:
1. Successful people understand that they create their own destiny.
Most people do not realize that a lot of their dreams and aspirations are actually achievable. Their dreams may seem beyond reach only because to pursue them would require people to go outside their comfort zone. A good example of this may be seen in people who wish to play a musical instrument or speak a foreign language. I would suggest that most people could learn to become competent at playing a musical instrument or speaking a foreign language, if they put their mind to it. However, because such an endeavour would involve some effort and a certain amount of dedication, many would see themselves as not capable of mastering it.
Successful people on the other hand, understand that they create their lives and shape their own destiny and are prepared to step outside their comfort zone to achieve their goals. They also understand that often they only need to step marginally outside their comfort zone to achieve their objectives.
2. Successful people understand that money invested wisely multiplies itself
Money makes money is a saying we have probably all heard before and the difference between the rich and not so rich is that the majority of ordinary people spend most of their money and invest what is left, whereas the rich invest most of their money and spend what is left.
Viewed in the context of the Cash Flow Quadrant, and assuming we start from a position of getting paid for our time as employees in the E Quadrant, our task is to invest what we can and let it multiply, with the aim of eventually moving to Quadrant B where we can own the system and pay others to work it for us. Investing in this context does not necessary mean investing in stocks and shares or similar ventures normally considered to be the preserve of the rich, rather it means investing in other less capital intensive ways that will enable us to leverage our time and get a higher return on our money.
One such way is to invest in an Internet Marketing business, where you can reinvest in generating more traffic, focus on getting more leads, increase conversion rates and increase your earnings per customer. If these terms and the whole concept of Internet Marketing are not familiar to you, then you can learn more by reading my Journey Into Internet Marketing article on this website.
3. Successful people are prepared to keep learning.
Quite simply, successful people are prepared to seek advice and lean from others, regardless of whether the latter are more or less successful than they are. Moreover, they do not begrudge others’ success and are prepared to help others to become successful.
4. Successful people have a “can do” attitude
Successful people do not waste time procrastinating. They recognize that you cannot get results without taking action. Obviously one has to exercise careful judgement in everything one does, however, successful people understand that every action has an element of risk and that not every action will have the desired consequences – some actions will result in success and others may lead to failure. It is all part of the learning experience on the road to success.
5. Successful people do not allow negative people to deflect them from their course.
Last but not least, successful people are resolute in their quest for success. Many will have come across friends, family and associates who sowed seeds of doubt in their minds about their dreams or aspirations, but they do not let these influence them in a negative way. This is not to say all advice from others should be ignored, only that one should take stock of it in light of one’s objectives and then make a judgement about whether or not to take the advice on board. Ultimately, one should be guided by one’s own instincts on the road to self improvement.
Journey to Quadrant I
As I said at the top of this page, only those people that are in Quandrant B and I of Robert Kiyosaki’s Cashflow Quadrant experience true time, money and location freedom. It goes without saying therefore that if you want the same freedoms also, then all your energy should be focused on getting to Quadrant B and I of the Cashflow Quandrant, and the road to Quanrant I begins HERE