The Cashflow Quadrant

 Cashflow Quadrant

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These are the 4 types of people in the business.

"E" stands for employee. They have a job working for someone else, usually getting paid per hour.

"S" stands for self-employed or specialist, like a doctor or lawyer, or someone who owns a local restaurant.

"B" stands for a big business owner, 500 employees, or more.

"I" stands for the investor.

All of these situations are different.

• The E and S side pay the most in taxes in the U.S. first of all. The employee usually has one job and they get benefits from that job. They followed the advice most of us hear about going to school and getting a job. So many people hate their job but at the same time are terrified of losing it. “Job security” doesn’t exist anymore. You have very little freedom and very little opportunity to raise your income as an employee. I remember when I had a job, it would go like this. I got paid every two weeks, so at the end of the month I had some money in the bank, but at the end of the month, the bills are due. Every employee knows what I’m talking about. It’s called living paycheck to paycheck. They get some money but then the bills are due and hopefully, there’s a little bit leftover. Sadly, some people have zero leftovers and some go into even more debt cause they have less than zero left. I hate being an employee.
  
  
• A self-employed or specialist person might make a lot of money, but it has downsides too. A doctor might make a lot of money, but they might spend most or all of it. I remember Robert telling me about a doctor friend of his. This doctor made $500,000 a year but spent $525,000. So even though he made a lot of money, he was still going into debt and had the cashflow of a poor person. So Robert says it’s not really about how much money you make. What E’s and S’s have in common is this: if they stop working, their income stops. Whether you’re an employee for a company or a doctor making a lot of money if you stop working you’re not getting paid. And that’s not what I would want.
  
  
• A big business owner starts their own company. They find a good team of people and hire other people. I love a quote from Rich Dad Poor Dad, “An intelligent person hires someone more intelligent.” A business owner finds partners and hires other people to do the work. A business owner builds a system and has intelligent people manage that system. The cool part is that once the business is up and running, the business owner can leave and stop working. The business owner can go on vacation but still has money coming in because they built a system and have people running that system.
  
  
• An investor is someone who has their money work for them. An investor buys into stocks or real estate or established businesses and lets the money flow in. This is where you get to after you’re already wealthy and you need somewhere to plant your money so it grows even more money.

The good news is that now with the internet you can create your own passive income sources that bring in money even while you sleep. You can sell digital products like ebooks or online courses. And you can do this without starting a “business” and hiring other people. That’s what I’m working on right now and if you search online for “passive income” or “how to make money online” you will find tons of information.

Public review on Amazon

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