Understanding the different methods by which income or money is generated and how it is utilized in essentially what Cashflow Quadrant is about. Read on to discover more about the Cashflow Quadrant.
The basic premise of the Rich Dad Poor Dad summary of books is that the business world is made up of largely 4 types of individuals:
1. Employee (E) – has a job.
2. Self-Employed (S) – owns a job.
3. Business Owner (B) – owns a business system.
4. Investor (I) – makes money work for them.
Identifying where you are in this Cash-flow Quadrant can largely be determined by where most of your income comes from. What affects which quadrant we decide to generate our income from is due to internal differences in our core values, interests, outlook, life stage, etc.
We can actually earn income from each of these 4 quadrants simultaneously if we so choose but most of your income will likely come from one quadrant. Whilst financial security can be found in each of the 4 quadrants, the skills and tools required and attained in 'B' or 'I' quadrants will help you achieve financial freedom more rapidly.
Traditional schooling teaches us largely to focus on becoming an Employee (E) or a high-paid Self-Employed(S) individual such as a doctor, lawyer or accountant. Whilst there is nothing wrong per se in this idea, it becomes a problem if your primary goal is to attain financial freedom. Financial freedom is seldom to be found in the Employee (E) or Self-Employed (S) quadrants.