Cash Flow Quadrant - Robert Kiyosaki

The “Cash Flow Quadrant” is a very popular concept credited to Robert Kiyosaki.  If you’ve ever read Rich Dad Poor Dad or Cash Flow Quadrant:  Rich Dad’s Guide to Financial Freedom you’ll be familiar with this.  Actually, nearly all of his books make reference to this.  In short, the Cash Flow Quadrant is a basic and visual way of showing how all the money in the world is made. 

E:  Is for Employees-  These individuals work for someone else to make someone else wealthy.

S:  Small Business Owners- A person owns a small business, franchies, or basically works for themself.

B:  Business owners:  They own a ‘’system” of making money, rather than a job to make money. 

I:  Investors:  Real estate investors, stock market, etc.  Spending money to earn interest on investments.

The whole idea he’s focusing on here is the idea of ”passive income”.  Income that will keep coming in even if you don’t work any additional hours.  Passive income earners would be your B or I, or your business system owners or your investors.  The idea is to build a system or a series of investments that will give you financial freedom because income will keep coming in.  Robert Kiyosaki encourages investing in real estate and joining a network marketing company or an MLM (Quixtar, Amway, etc).  With an MLM, you build a business system by recruiting other individuals to sell your products or service and then the income keeps coming in because they recruit more folks and then those folks recruit more folks, etc, etc, etc.  Investing in real estate is the same way because you’re owning a property that you can rent out to people month after month after month. 

I think the idea of passive income is great.  Owning real estate investment properties is something I plan to do in the future.  I hope to own multiple condos, townhomes, multi-unity properties, etc. and rent them all out and structure the deals for positive cash flow.  The problem with the Cash Flow Quadrant is, if you don’t have a buttload of cash to throw into down payments on investment properties, you can’t really pursue ”passive income” unless you start a business system like an MLM (borderline pyramid scheme).  I don’t see myself joining an MLM and, to be honest, the thought of starting a company that’s my own, growing it myself, creating my own culture, etc. is very appealling to me.  I think I can make more money growing a business than I can with an MLM or just working and putting my money saved into the real estate market off the bat.  The idea of freedom is great, don’t get me wrong.  But I’m young, aggressive, and motivated and I want to build something huge. 

In conclusion, I respect Robert Kiyosaki and his books are very informative and motivated me greatly.  Also, the cash flow quadrant is great, but only for the wealthy and the aggressive/financial illiterates that join MLM’s following their dreams of freedom.