Cashflow Quadrant in Review
By admin | August 14, 2008
By Nicole A Farrington
Cashflow Quadrant written by Robert Kiyosaki and Sharon Lechter is truly a phenomenal sequel in to Rich Dad Poor Dad series. We recall in the book Rich Dad Poor Dad Robert Kiyosaki shares the insight on money and wealth guided from his two dads: his ‘Poor Dad’ being his biological father and his ‘Rich Dad’ who was his best friend’s father. Both dads served as mentors on his journey to financial freedom. In Cashflow Quadrant, Kiyosaki and Lechter have graciously drawn back the vale of Financial Literacy to reveal the path to Financial Freedom and why some people work less, earn more, pay less in taxes and feel more financially secure than others.
Identifying ones position in the Cashflow Quadrant was quite sobering, but the most exciting and encouraging revelation was discovering that you don’t have to stay where you are if that’s not where you want to be.
Cashflow Quadrant addresses three perspectives: The Cashflow Quadrant, Bringing Out the Best In You, How to become a Successful “B” & “I”.
In Part I - Cashflow Quadrant – Kiyosaki and Lechter address the core differences between people in the four quadrants and destroy the myth that “It takes money to make money” or Go to school, get good grades, get a secure job with benefits and you’ll be wealthy. Each quadrant represents one way income is generated in an economy:
E- for employees B- for Business Owners
S- for Self-employed I - for Investors
It was exciting learning the core differences in thinking between people in the varying quadrants and why some choose Security over Freedom. The primary reason many people seek job security is because that is what they are taught to seek at home and at school. What was also revealed is that it takes Financial Intelligence to gain financial freedom which is primarily obtained in the “B” & “I” Quadrants.
In the “B” Quadrant there are three (3) kinds of Business Systems:
Traditional C-type corporations
Franchises
Network Marketing
In the “I” Quadrant there are seven (7) levels of Investors:
Level 0 – Those with nothing to Invest
Level 1 – Borrowers
Level 2 – Savers
Level 3 – “Smart” Investors
Level 4 – Long-term Investors
Level 5 – Sophisticated Investors
Level 6 – Capitalists
To close out the first part of the book the authors discuss a concept I had never heard before, that money is not seen with the eyes it is seen with the mind. And if you want to be successful on the right side of the quadrant, when it comes to money you have to know the difference between facts and opinion. Wow!
In Part II – Bringing Out The Best In You, I discovered that ‘Financial Freedom’ is not only about numbers, its more about you and how you think – so it makes sense that Kiyosaki and Lechter first discusses the topic – “Becoming who you are”.
In his words of encouragement to those contemplating migration from job security to financial security and freedom – the critical component to success is the change you experience internally and who you become in the process. He notes that, “The part of you that still seeks security is at war with that part of you that wants freedom. Only you can decide which one will win. You’ll either build that business or you’ll go back to finding a job forever.” Then the question we all have been asking – How do I get rich? “Four green houses, one red hotel…” sounds familiar yep that’s the strategy he used. And then back to the focus - “you”. For the majority of us we believe that if we can do what the wealthy do we will become one of them. Kiyosaki dispels this myth also – he says, “It is not so much what the “B” or “I” does that makes the difference; it is more how they “think”. Who they are at their core “being”.
So Robert, what are you saying? “It’s all about “being” – so be the bank? I just love how he breaks the status quo thinking that had kept so many people confined to the left side of the quadrant.
In Part III – How to Become a Successful “B” & “I” we are encouraged to Take Baby Steps. Robert says, “ Instead of taking a “Great Leap Forward” I would strongly recommend taking a baby step forward. Long-term financial success is not measured in how big your stride is. Long term financial success is measured in the number of steps, in which direction you’re moving and in number of years.” Talk about deep brake marks in the road – thank you Robert!
He then lays out seven (7) steps toward Right side Quadrant success and you know whose sitting up straight and paying attention them.
Step 1 - Mind Your Own Business! – No I’m not insulting you and neither is Kiyosaki, actually that is the best advice you can get. Begin your baby steps to success by:
Examining your Income Statement and Balance Sheet.
Setting Financial Goals
Step 2 - Take Control of Your Cash Flow – “More money will not solve the problem, if cash flow management is the problem” Robert Kiyosaki’s Rich Dad.
Step 3 - Know the Difference between Risk and Risky – Proper cash flow management begins with knowing the difference between an asset and a liability. The difference between risk and risky is the level of ones Financial Intelligence.
Step 4 - Decide What kind of Investor you want to be.
Step 5 - Seek Mentors – A mentor is someone who is already where you want to be, who tells you what is important and what is not important.
Step 6 - Make Disappointment Your Strength – Prepare yourself mentally for disappointments.
Step 7 - The Power of Faith – A wise man once said, “If you believe you can or if you believe you can’t you’re right.” In other words having the information, a mentor and the opportunity mean little if you don’t believe that you have what it takes to accomplish your dreams.
There are a whole lot more details that I hardly have time or space to list and I would hate to rob you of the experience that sitting down with this book brings. It is truly a delightful and life changing read.
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