Robert Kiyosaki's Cash Flow Quadrant: Why working is the worst way to make money.
Robert Kiyosaki is an American investor who made his fortune through something he calls the Cash Flow Quadrant. Have you ever noticed that in today’s economy, while the middle class is struggling in a tough job market, corporations just keep getting richer? Here’s how the Cash Flow Quadrant explains that situation. Imagine a quadrant divided into four kinds of people:
Employees -- you have a job.
Self-Employed People -- you own a job.
Business Owners -- you own a system and people work for you.
Investors -- money works for you.
On the left side are Employees and Self-Employed people, and on the right are Businesses and Investors. While the people on the left work for a living and pay the most taxes, the people on the right invest in assets that produce ongoing cash flow even when they’re sleeping, yet they still pay the lowest taxes! Basically, the line between the left and right side of the Cash Flow Quadrant is the line between the people who are struggling in today’s economy and the people who are amassing great wealth.
You know what it’s like to be a working person. Jobs are scarce and prices keep rising. If you’re lucky enough to have a good job, chances are your income isn’t keeping up with inflation and high taxes drag your take-home pay even lower. All it takes is another downturn for you to lose your job and all your hard-earned financial security.
On the other hand, if you’re a business owner (with a business that runs without you) or investor, you no longer have to trade time for money. Now you can get other people, systems and money to work for you, even when you're not working. When you escape the time-for-money trap, there's no limit to your income potential. And as an added bonus, you pay the income potential.
The solution is to shift from the left side of the Cash Flow Quadrant to the right, as soon as you can. If you prefer the investing option, reduce your debts, pay down your mortgage, then use that equity to invest in revenue-generating properties and investments. Before long you too will be on the wealthy (freedom) side of the Cash Flow Quadrant!