Robert Kiyosaki’s Cash Flow Quadrant is a great illustration of what it takes to gain financial freedom for you and your family.
It also is a great explanation of the difference between linear and residual income.
The four quadrants are (E)mployee, (S)elf-employed, (B)usiness Owner and (I)nvestor.
Robert want’s people to understand that one can and should move from the E and S quadrants to the B and I quadrants in order to become wealthy and financially free.
On the upper, left side of the quadrant is the “E” quadrant where a majority of people are… they have a job. They are Employees. Those at a job are 100% totally dependent on their income.
Similar to the bottom, left side of the quadrant is the “S” quadrant where the self-employed are…they own a job. Doctors, Lawyers, Realtors and other professionals.
Both quadrants trade time for money. If you don’t go to work…you don’t get paid.
Even though a Doctor is considered to be a prestigious job, they are limited to the number of patients they can see a day, so their income can’t really grow much. Same for an attorney. As for a Realtor, once a transaction closes, the Realtor is back to being unemployed and has to look for that next sale.
On the upper, right side of the quadrant is the “B” quadrant. Those in this quadrant build and own a system by leveraging the efforts of people to generate an income. That business becomes an asset that generates money for them. Here you aren’t selling your time for money, but rather selling a product or service. In other words, you don’t have to be working to generate income.
Those in the “I” quadrant are known as Investors. They invest their money in businesses and in other types of assets. Typically they will not work in the businesses they invest in. They have their investments to generate wealth for them. This is passive income.
Investments could be owning and renting out real estate, stocks and bonds that generate cash flow. These are investments that allow you to retire and get out of the “rat race” as Robert explains in his book.
Get to the B” quadrant through Network Marketing then eventually move into the “I” quadrant.