Wednesday 11 may 2022This cashflow quadrant concept groups one's sources of income into 4 categories, namely E, S, B, and I. This concept was introduced to make it easier for someone to achieve financial freedom.
Based on this concept, Robert T Kiyosaki explained that everyone has the opportunity to change the direction of his life and realize his dreams by managing finances well.
So that we can also apply it, now we will discuss more about the cash flow quadrant concept that was initiated by Robert T Kiyosaki.
What is the Cash Flow Quadrant?
The concept of cash flow quadrant was first described by Robert T Kiyosaki in the book cash flow quadrant that he wrote.
This concept explains that there are 4 categories of individuals based on their sources of income, each of which requires a different strategy to manage their finances.
This concept explains that each category in this quadrant has a different way of earning income and how the categories in this quadrant manage finances.
In this cashflow quandrant, Robert Kiyosaki divides it into 4 quadrants, the first is E (Employee), S (Self-Employee Business), B (Big Business), and I (investor).
In detail, let's discuss one by one these four types of cashflow quadrants.
1. Quadrant E (Employee)
Quadrant E or employee is a quadrant for groups who work as employees with a fixed salary every month from the company or business where they work.
The employees in this quadrant are so broad that everyone who works in a business that is not theirs falls into this category. People who are in the quadrant have their main income in the form of a salary they get every month.
As an employee, of course, someone is paid based on their abilities and competencies so that the level of financial comfort of each employee will be different.
People who are in this quadrant tend to pay attention to the long-term certainty aspect of the business they will run. This is because salary as an employee is the main income on which their income is based.
Because of this, many people from this quadrant are not so risk-taking because they already feel they are in a comfort zone with the stable income they get through being an employee.
2. Quadrant S (Self Employed Business)
Next are people who are in the S quadrant or self-employed business, which are people whose main income comes from the business or business they run themselves.
People in the cashflow quadrant are arguably one step more daring in taking risks than people from the E quadrant because they dare to run their own business. As we know, running a business is not an easy thing because we will face various risks and need to develop various accurate strategies to deal with these conditions.
Therefore, entering into this quadrant can be said as a step to get closer to the financial freedom that someone wants. Being on this side means that you have a strong mentality again to deal with various unexpected conditions that come out of your comfort zone.
3. Quadrant B (Big Business)
Quadrant B or big business is an advanced stage of the previous quadrant so that at this stage the business enters a much more serious stage.
People who fall into this category usually run businesses on a large scale. People who have reached this stage usually already have good business management skills and have been able to build systems to unite people from the E quadrant to help business processes.
So in addition to the ability to manage a business, people in quadrant B also have good human resource management skills to facilitate the achievement of what they want.
Therefore, people who are already at this stage do not have to go down immediately for anything because they have their business running on auto-pilot through a system that they have designed well.
4. Quadrant I (Investors)
Quadrant I or investors are groups of people who get income from their investment in a business or company. The group of people in Quadrant I are no longer directly involved in the business because they only act as investors who will get passive income from the business or company they have funded.
People in this group are already in the stage of financial freedom because their money can work on its own to generate subsequent profits. The Richest 1% which controls almost 44% of the world's total wealth is one example of people who fall into the category where they don't have to bother going directly into business anymore because they already get passive income from the investments they make.
But don't forget, this stage is not something that can be achieved overnight because everything takes a long process. People who are already in this quadrant are usually also groups S and B until they finally reach the stability they are today.
Understanding well personal cashflow is very important so that we know what steps we should take to accelerate the financial freedom we want.
This will help you understand with what preparation we need to enter into the next cashflow quadrant. In addition, you must remember that everything needs a process so you have to be able to go through these various processes. Before finally becoming investors, these people usually have run their own business until they can finally become investors.
Therefore, in addition to working harder to make money, you also need a better investment strategy to accelerate the financial freedom you want.
Robert T Kiyosaki is my favorite author and I also watch his You Tube videos about investment. His ideas are excellent and worth pondering upon. Yes, we should not be contented on being an employee but rather we should strive harder in order to become businessmen and/or investors.