The secret to financial freedom (The Cashflow Quadrant)

You might be wondering what actually the secret to financial freedom is and you must have probably read or seen so many concepts on how to get financial freedom. What if I told you there’s another way, and that way is all about Cashflow Quadrant. You might be wondering what a Cashflow Quadrant is and how it works, and what it is, is that it’s a theory that was actually proposed by a man called Robert Kiyosaki, and the theory gave a good description or explanation has to why the rich are getting richer and the poor still remaining where they are or getting poorer.

He also suggested that in the world as whole there are actually two categories that people are divided into, and one of the category are those that actually see the world from the right side of the Cashflow Quadrant, and the second category are those that see it from the left side of the Cashflow Quadrant. Basically, the Cashflow Quadrant is divided in four different types of people and they are two in each of the categories.

source

On the left side of the Cashflow Quadrant, we have E and S, where E is for employee and S is for Self-employed.

source

Employee (E) : Everyone wants to have his/her company, to be a boss on their own but what they fail to understand as a business owner or an investor, you are automatically open to different types of risk and what we need most to overcome these risks is security. Employees don’t always want to hear about risks or always want nothing to do with it but they fail to understand or learn how money or investment works and all they know is that wants they have the basic knowledge taught to them and have the certificate, then they are good to go.

source

Self-employed (S): Most people believe they do better being self-employed, but the truth is they are not a better employee. They earn their money only when they work that day and when they don’t nothing is gained and what they own is a job not actually a business. Unlike the employees (E), the self-employed have a higher tolerance for risks even though they still like the idea of security.

On the right side of the Cashflow Quadrant, we have the B and I, where B is for business owner and I for investors.

source

Business Owner (B): business owners to me can also be classified as an entrepreneur, because unlike the employee, the business owners don’t have jobs they just have what they do like a product they sell that generates money for them daily or once in a while and they also have the ability to employ person or persons that has the ability or skills to help manage their business.

source

Investors (I): investors tend to be more educated when it comes to financial ability than any other category in the Cashflow Quadrant because they can easily generate steady income just with any assets they own and also use the profit they make from that particular assets to acquire more assets and also generating more income, and it keeps going on and on making them richer and richer.

So if you were ask why the rich are getting richer on a steady base and the poor being stagnant or getting poorer, well it’s because the rich decided to use the power of compounding, they believed in what they call delayed gratification and they had a long-term plan and vision. And for the poor, which is those on the left side, sometimes they work to earn their income and sometimes it’s the one with the highest taxed income and they only live with paychecks. That is, those on the right side of the Quadrant earn passive income and pay least tax and hedge against inflation

Posted Using LeoFinance ^Beta