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- TCFBO #052: The Cashflow Quadrant
TCFBO #052: The Cashflow Quadrant
How to become more resilient through systems and investments.
Read Time: 3.5 minutes
If you've ever read Robert Kiyosaki's "Rich Dad, Poor Dad 2 - The Cashflow Quadrant" you'll know it's more than just a financial concept—it's a roadmap for shifting how you earn and manage money.
The quadrant is divided into four categories that represent different ways of generating income.
They are:
1. Employee (E): You work for someone else and earn a wage or salary.
2. Self-Employed (S): You work for yourself, trading your time and skills for money.
3. Business Owner (B): You own a business that generates income without your constant involvement.
4. Investor (I): Your money works for you, earning returns through investments.
For many people, the aim is to progress through the quadrants, building financial independence and securing future wealth.
But how can you move from one quadrant to the next?
From Self-Employed to Business Owner
If you're currently self-employed, the transition to becoming a business owner means moving from working in your business to working on your business.
As a self-employed individual, you are the business.
Without you, the revenue stops.
So the goal is to build a system that can function without your direct daily involvement.
In order to achieve this you need to create systems and processes.
If you’ve never documented a process before, check out this post.
Once you have a process you’ll be able to see where other people or technology can carry out parts (or all) of the process making the business less reliant on you personally.
From Business Owner to Investor
Business owners often have their income tied up in their business.
But moving to the investor quadrant involves diversifying your income streams.
The goal here is to create money through investments that grow your wealth without you having to actively manage each income source.
So instead of reinvesting all profits back into the business, look at ways to put a percentage into other investments.
By diversifying, you are aiming to create passive income streams that work for you while your business remains productive.
The critical thing in moving to the Investor quadrant is being prepared to invest your time and money in your financial education.
There’s nothing wrong with delegating the management of your investments, but avoid abdicating that responsibility just because it looks too difficult or you can’t be bothered.
Moving through the quadrants is mainly about shifting your mindset and building systems that can work independently of you.
If you take small, strategic steps, you can progress from self-employed to business owner and, ultimately, to an investor whose money works for them.
With all that said, we’d caution about linking your “success” to moving through the quadrants.
If you love being self-employed and that aligns with your vision, great!
There’s nothing to stop you from continuing in that role and still growing your investments so that if you can’t work, or during slow times, you have other income streams to support you.
You don’t have to become a Business Owner.
Similarly, if you’re a Business Owner and love the business you’ve created, you don’t have to abandon it to become an Investor.
You can do both.
If you’re doing what you love and creating your vision, in our opinion, you’re already a success.
Let us know how you get on and we’ll see you next week.
Paul & Philly
P.S. We’d love to know which quadrant you’re currently in so we can tailor more of our content to help you.
Just hit reply and let us know if you’re “Employed”, “Self-Employed”, “Business Owner”, “Investor” or a combination of both.
Whenever you’re ready, there are three ways we can help you:
Grab a copy of Paul’s book “Backwards Planning - A Simple Method to Move You and Your Business Forward” and discover how to reverse engineer a life and business you truly love.
Book a facilitated “Life Vision Session” today and start creating a life and business that are fully aligned with your heart’s desires. We’ll arrange a pre-session call with you to say “Hi”, explain how the Life Vision Session works and answer any questions you may have.
Apply to join “The Clear Focus Business Academy” and ensure your business is the most effective it can be at providing the money and lifestyle you desire. Simply drop us an email or contact us here to tell us you’re interested and we’ll send you more info.
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