Why is wealth distributed unevenly? Can it be because of our financial literacy?

Robert Kiyosaki was the dynamic mind that coined the concept of a Cash flow Quadrant, a simple guide that allows all those who seek to generate wealth of simply understanding the dynamics behind money-making. He described the 4 quadrants to identify the 4 distinctive types of mediums that allow one to earn money through the different effort and input outcomes.

These quadrants, consisting of Employee, Self-Employed, Business Owner, and Investor. Each of these with a very unique meaning and different perspective of dealing with our most important resources of time, money and people.

The Employee and Self-employed fall on the left side of the quadrant, while the Business owner or entrepreneur and investor fall upon the right side of the quadrant, a significant factor, just as the picture above.

Before you understand the quadrant, it is important to understand the difference between active and passive income. Active income requires time, constant performance and work, on the other hand, passive income does not require you to provide time and constant effort in order to make money.

Let’s take a look at the quadrants:

E Employee: Refers to an individual who is a job holder. Most individuals fail to progress beyond this quadrant, trading time and efforts to gain money from a daily job. The money perspective here is that time is equal to money, having a 8-5 hour job to justify the amount of money at the bank account of which we work harder to climb the co-operate ladders or change from jobs to jobs seeking for better salary and benefits. The income in this quadrant is always active and never passive.

S Self-Employed: Refers to a self-employed professional or a small business owner, this can also include professional practitioner such as dentists, doctors or lawyers. These individuals tend to enjoy more freedom than the employees since they tend to have their own establishments and can choose their own work hours and clients.However, still being on the left side of the quadrants, they as well trade money in exchange for their time. They may be business owners, but in reality, their business owns them because, they are the business and it cannot run without them.

B Business Owners: Refers to big businesses, corporations and manufacturers selling a portfolio of products and services. Their core business is built around systems, routines, other people or partnerships.Instead of trading time for money, they leverage systems to make them money. They tend to work outside their business instead of inside it. They can be away from their business for long periods of time and their business will still be the same or even better, due to the automation they put in place. They normally go out to hire the best of the best to run their businesses giving them more time on developing it. The do enjoy freedom and passive income from their businesses.

I Investor: Individuals who make investments in various industries and markets, such as real estate, stock exchange, currency trading etc. Investors are the individuals who truly enjoy passive income by leveraging time and money. They use the power of compounding to generate multiple stream of passive income.

80-90 % of people fall on the left side of the quadrant, which is understandable, due to our financial literacy. The truth is that, we are never taught how to deal with the three important resources in any school, which are time, money and people. When we often learn that time is infinity times more precious than money it is often too late.

In his book, “The Rich Dad’s Cash flow Quadrant”,Robert T. Kiyosaki explains that most of us have the potential of creating an income through all of the four quadrants mentioned above. Kiyosaki explained that the quadrant that we chose to earn our primary income should not be dependent on the formal education degrees we have acquired, but in fact, it should be defined by “who we are at the core-our values, strengths, weaknesses and interests”. He stated that these are the major differences that allow us to succeed or fail in each of the quadrants, and regardless of the kind of profession or work that we are most passionate about, working in all four of the quadrants is pragmatic and realistic.

Reading this far proves that you are not like most people, and we know that just from the fact that you are interested in learning more about the ‘Cash flow Quadrant.’There is a lot more to attain from understanding the quadrants such as taxes, value and leverage, get Started!!! Get in touch with us if you would like to know how we can help you and others like you.