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Rich Dad's Principles: The 4 CASHFLOW Quadrants

Unveiling the reasons why the rich become richer while the poor struggle


✔ The rules of money have undergone significant changes, rendering our parents' advice obsolete.

✔ Grasping the new rules of money is the key to thriving in today's world.

✔ The CASHFLOW Quadrant unravels the diverse paths to financial success, with the right side holding the key.

In the present era, the rules governing money have transformed. Reflect upon the profound changes that have unfolded over the past four decades. How can anyone believe that following the same footsteps as their parents is the way to get ahead in today's world?

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8 New Rules of money

Robert Kiyosaki's book "Conspiracy of the Rich" sheds light on the new rules of money. Let us explore the 8 vital principles that everyone must embrace to prosper in the modern landscape:

Rule #1 - Money is knowledge
Rule #2 - Master the art of leveraging debt
Rule #3 - Command cash flow mastery
Rule #4 - Prepare for adversity to welcome prosperity
Rule #5 - Embrace the power of velocity
Rule #6 - Speak the language of money fluently
Rule #7 - Life is a team sport; choose your teammates wisely
Rule #8 - As the value of money diminishes, learn to create your own

By internalizing these fresh rules of money, you gain the tools to navigate through a dramatically altered world. Although there is a strong likelihood of achieving entrepreneurial success, the old-fashioned approach will no longer suffice. Relying on outdated advice and conventional rules handed down by your parents is inadequate.

THe 4 CASHFLOW Quadrant

To truly grasp the new rules of money, it is essential to understand that the world comprises two distinct groups:
those who perceive life from the left side of Rich Dad's CASHFLOW Quadrant and those who view it from the right side.

The CASHFLOW Quadrant consists of four individuals, each representing a different avenue to financial prosperity.
1. Employee
2. Self-Employed
3. Business Owner
4. Investor

Every individual who generates income falls into at least one of these four sections (quadrants), and their position is determined by the source of their cash inflow.

The left side of the CASHFLOW Quadrant is where you find many employees who depend on their pay checks, as well as self-employed individuals. The right side, on the other hand, is reserved for those who derive their income from businesses they own or investments they make.

About National Achievers Congress

Success Resources' hallmark event since 1993, the National Achievers Congress was the event that started it all with over 5,000 participants.

National Achievers Congress to tour around the world including Australia, Singapore, Malaysia, South Africa, Amsterdam, India, United Kingdom, Germany, Dubai, Taiwan, China and Philippines.

Many speakers have shared their stage for the past 30 years of National Achievers Congress including Anthony Robbins, Robert Kiyosaki, Jay Abraham, Les Brown, Grant Cardone, Gary Vaynerchuk, Nick Vujicic and many others. 

🌟 The Left Side of the CASHFLOW Quadrant:

Let us explore the E's and S's and understand their distinctive mindsets and behaviours.

⭕ E Stands for Employee:

For employees, security is of utmost importance. Robert's poor dad, who spent his entire life as an employee, valued security above all else. He could not fathom why Robert would choose to be a business owner and investor, as he saw it as a risky endeavour.

Employees, being risk-averse, often overlook the importance of financial education. Their focus is primarily on acquiring skills that secure them steady, high-paying jobs with excellent benefits.

When employees need more money, they seek higher-paying employment opportunities.

⭕ S Stands for Self-Employed:

Self-employed individuals, who reside in the S quadrant, are not inclined to be employees, and often believe they can do things better than anyone else. While they appreciate the idea of security, they have a higher tolerance for risk and prefer working for themselves. They feel a sense of control over their own destiny.

The S quadrant includes professionals like doctors, lawyers, dentists, accountants, consultants, and other service-based businesses. They hold themselves to high standards and struggle to delegate tasks to others. They are hesitant to hire employees because they believe nobody can do the work as well as they can. Consequently, they only make money when they are actively working. In essence, they do not own a business but rather a job.

When self-employed individuals need more money, they look for additional billable hours.

🌟 The Right Side of the CASHFLOW Quadrant:

On the right side of the quadrant, we have the B's and I's. While financial freedom can be attained in all quadrants, the skills of the B and I categories can accelerate your progress towards achieving your financial goals.

⭕ B Stands for Business Owner:

Unlike those in the S quadrant, business owners do not own a job; they own a system or a product that generates income even when they are not personally involved.

Recognizing that they cannot achieve success alone, business owners hire people with specialized skills required for the business, often seeking individuals who surpass their own talents and expertise. They delegate tasks as much as possible, avoiding the urge to keep all the work for themselves. Exceptional business owners understand that they can step away from their company for an extended period and return to find it profitable and operating more efficiently than when they left.

Although business owners are often viewed as risk-takers, they consider being an employee as the riskiest choice due to the lack of control. A business owner can make decisions regarding layoffs or terminating employees, but their business cannot be taken away from them. When the economy experiences a downturn, business owners have the most control to adapt and ensure the survival and success of their business.

When business owners need more money, they create new products or systems that generate additional income.

⭕ I Stands for Investor:

Investors possess the highest level of financial education in the CASHFLOW Quadrant. They excel at identifying assets that provide consistent cash flow and often leverage other people's money (OPM) to acquire such assets. They utilize the income generated from these assets to acquire even more, harnessing the velocity of money to grow their wealth.

Investors enjoy significant tax advantages, have the option to not work at all if they choose, and are not burdened with managing employees. The wealthiest individuals in the world are investors, with approximately 70% of their income derived from investments, while the remaining 30% of their income consists of wages.

When investors need more money, they actively seek opportunities to acquire assets that generate passive income. They understand the power of building a portfolio of income-producing investments that work for them, providing financial stability and growth.

By understanding the distinction between the left and right sides of the CASHFLOW Quadrant, you can gain valuable insights into the mindset and behaviours of individuals in each category. This knowledge allows you to make informed decisions about where you stand currently and where you aspire to be. Remember, transitioning from the left side to the right side requires a shift in mindset, continuous learning, and taking calculated risks.

Ultimately, embracing the principles and lessons from the CASHFLOW Quadrant can guide you on a path towards financial freedom and abundance.

✳ The cost of choosing security over freedom

Choosing security over freedom can come at a high cost. True entrepreneurs understand that comfort is fleeting, and they are willing to embrace challenges and unforeseen circumstances to pursue their dreams. Unlike those who settle for secure jobs, entrepreneurs aim to build businesses that generate revenue even when they are not actively involved.

The CASHFLOW Quadrant serves as a dividing line between those who struggle financially and those who prosper. Many individuals on the left side of the quadrant believe they are secure, while perceiving business owners and investors as risk-takers. However, the reality is that those on the left side pay more in taxes and interest on debt as their income increases, trapping them in what we call the Rat Race.

Being rich is not determined by how much money you make, but rather by how much money you keep.
Individuals on the right side of the CASHFLOW Quadrant pay the least in taxes, leverage debt to generate wealth, and protect themselves against inflation through their assets. They not only earn more money than employees and self-employed individuals but also retain a larger portion of their earnings.

✳ The mindset we are taught vs. the mindset we create

The mindset we acquire through the educational system often limits our potential. Schools fail to recognize and nurture the genius within each child. Instead, they promote a single mindset aligned with the left side of the CASHFLOW Quadrant. As a result, many individuals end up chasing careers prescribed to them, such as doctors, lawyers, or teachers, and find themselves trapped in the Rat Race.

To break free from the limitations of the left quadrant, it is crucial to change our mindset and discover our own path. This journey may not be easy, but it is necessary to unleash our inner genius and live a fulfilling life. If you find yourself longing for more money, eagerly waiting for the weekend, or yearning for the opportunity to pursue your own dreams, it may be time to shift your perspective and embark on a new path aligned with your purpose.

Moving from the left quadrant to the right quadrant requires a shift in mindset. A study on those who transitioned from poverty to wealth revealed three key factors:
- Maintaining a long-term vision
- Practicing delayed gratification
- Harnessing the power of compounding.

On the other hand, those who went from wealth to poverty exhibited short-term vision, a desire for instant gratification, and a misuse of compounding.

To transition to the right side of the CASHFLOW Quadrant, it is essential to focus on acquiring assets that generate passive income instead of relying solely on a pay check-to-pay check lifestyle. Start small, be patient, and witness the growth of your wealth over time. Investing in learning how to operate on the business owner (B) and investor (I) side of the quadrant will yield a greater return than a traditional education. Read Rich Dad's CASHFLOW Quadrant, attend workshops, and invest your time and money wisely to enhance your financial intelligence.

By embracing these principles, you can pave the way for a successful journey toward financial freedom and abundance.

❗️ Important Note: Please DO NOT regard the recommendations found in this blog or any of our opinions on them as investment or tax advice.

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About National Achievers Congress

Success Resources' hallmark event since 1993, the National Achievers Congress was the event that started it all with over 5,000 participants.

National Achievers Congress to tour around the world including Australia, Singapore, Malaysia, South Africa, Amsterdam, India, United Kingdom, Germany, Dubai, Taiwan, China and Philippines.

Many speakers have shared their stage for the past 30 years of National Achievers Congress including Anthony Robbins, Robert Kiyosaki, Jay Abraham, Les Brown, Grant Cardone, Gary Vaynerchuk, Nick Vujicic and many others. 

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