Applying Cashflow Quadrant Concept
All of us in one way or another desire financial security and many of us dream of attaining financial freedom. Robert Kiyosaki’s Rich Dad, Poor Dad’s Cash-flow Quadrant book and board game teach the principals of income, assets and cash flow. Understanding the different methods by which income or money is generated and how it is utilized is essentially what Cash-flow Quadrant is about.
1. Learn about the concept of the 4 individuals. The basic premise of the Rich Dad, Poor Dad series of books is that the business world is made up of largely 4 types of individuals:
2. Identify where you are now. Identifying where you are in this Cash-flow Quadrant can be done by looking at 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.
- Employee (E) – has a job.
- Self-Employed (S) – owns a job.
- Business Owner (B) – owns a business system.
- Investor (I) – makes money work for them.
2. Identify where you are now. Identifying where you are in this Cash-flow Quadrant can be done by looking at 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.
3. Decide where you want to be. Traditional schooling teaches us largely to focus on become an Employee (E) or a high-paid Self-Employed(S) individual such as a doctor, lawyer or accountant. While there is nothing wrong with this idea, it becomes a problem if your primary goal is to attain financial freedom. Financial freedom is seldom to be found in these quadrants.
4. Decide if financial freedom is for you. The words ‘financial’ and ‘freedom’ go hand-in-hand. You can never really be truly “free” in the modern world we live in unless you are financially free. The whole purpose of life is to generate and experience more life. Money allows you to “live” more life. Financial freedom is when you have enough wealth (assets and cash-flow) to allow you live more life on a sustainable basis.
- Changing quadrants is a life-changing experience and often requires a fundamental shift in ones core values in order to come about.
- This requires massive action and massive personal transformation. You will be required to step outside your comfort zone. Once you have crossed the proverbial Rubicon, or "crossed from the left side of the quadrant into right side", there is generally no turning back.
5. Gain financial intelligence. The attainment of financial freedom requires a high level of financial intelligence. You need to be ready to move beyond job security (in the ‘E’ quadrant) in order to begin your journey towards financial freedom. Be under no illusions though; it is a bumpy, windy road laden with risks that need to be constantly managed. It is NOT for you if you want a secure, normal life. However, if you are prepared to make the leap, the prize at the end of this particular journey is financial freedom.
6.
Become aware of the risks included. It is important to note that success is not guaranteed. For example, 80% of businesses start-ups never get to celebrate their 5th birthday. And of those that have become a successful, many successful “B’s” have lost their money through over-confidential forays in the “I” quadrant. The road to financial freedom is littered with casualties and people who turn back on their goals out of fear.
7. Get the skills needed. Many of the skills required to be successful as a Business Owner (B) or Investor (I) are not taught in school. In fact it’s remarkable just how many successful businessmen left school early but got their real education in the cut and thrust of the business world. Most successful business owners are innately curious, knowledge-thirsty and uncompromising in the pursuit of their goals. They chose to learn through Mentors; they read voraciously, and attend training courses and educational seminars converting this knowledge into action.
- The rules of the game are totally different in each quadrant. They are completely different worlds and require different mindsets, tools, skills and behavior. Continuous learning and education will be your constant bedfellows in order to help you on this journey through each quadrant.
A commence on your journey to financial independence in
earnest, nothing changes until you change, nothing moves until you move. Goals are
indispensable, tips and how to’s can be invaluable. Support groups are
wonderful. The engine is your mind. Until your mindset aligns with the
direction you want to go, your body alone cannot make the journey.
It is crucial that we get the point that we
have to work on our mind first before we start to do, so that we know what we
are doing, and can sustain that action. The wonderful thing about reading is
that it expands your mind and opens your eyes. The moment your mind expends, it
never shrinks back to its former size. The more you keep reading, you mind
keeps expanding and the more you exercise your mind. Common sense starts to
become obvious.
When I was just starting out on my journey
years back, I had no idea I had to change first. My focus was on doing things
differently. The challenge was, I knew what to do, but I could not discipline
myself to do it consistently. I would save for a month or two, than something
will happen and I will go to the bank and withdraw the money. That de-motivated
me hence I fell back to non saving days. I would buy shares a month or two, and
then I would stop for months and months. It was a hit and miss. There was no
method or consistency. I was all over the place, littering the landscape with
abandoned projects. After a while, it began to seem like mission impossible.
It wasn’t until I made the connection between
personal growth and development, and financial freedom and
independence that I was able to focus and make progress, start and finish, set
a goal and accomplish it. Folks want to hit the ground running before learning
the basics. They want ‘fast food’. I well prepared and healthy meal takes too
long. Folks are attracted to ‘how to’ information, ‘ten ways to save money’,
‘how to save on your bills’ etc. Until you become the person that can follow
through on a tip or advice, you will continue to hit and miss.
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