Robert Kiyosaki was born and raised in Hawaii. He is an American investor, businessman, self-help author and motivational speaker. ‘Cashflow Quadrant’ is his follow up book to the bestseller ‘Rich Dad, Poor Dad’. It reveals strategies for moving beyond just job security to greater financial security by generating wealth from four selective financial quadrants. These quadrants are what Mr. Kiyosaki calls the four types of people who make up the business world – employees, the self-employed / small business owner, the big business owner, and the investor. The goal of this book is to get us thinking about the benefits of moving from the left side quadrants (employee and self-employed) to the right side quadrants (big business owner and investor). This is where the two ideas that started this post come in. What is the difference between security and freedom? What does it mean that money can’t be seen with the eyes? Read on for my interpretation of Mr. Kiyosaki’s two theories.
Security vs. Freedom
Security is what we are taught in school and by our parents. It’s conditioned into us. Security tells us to get a degree, get a job, work for a pension, and save our pennies. Unfortunately, this lifestyle usually doesn’t provide us with the income we need for all those things we want, and so we get into debt. The more debt we get into, the more we are tied to our secure jobs and our secure paycheques. If we do work hard, however, we sometimes get to move up the corporate ladder. Unfortunately, in this structure, more success usual equals less time of your own to be with your family, to exercise, or to pursue your hobbies. This leads to stress, which leads to a myriad of health problems. To add insult to injury, pursuing security as an employee or self-employed individual puts you into the highest tax brackets.
Freedom is what you get when you establish a healthy stream of passive income (cashflow). This could be from a business that you have built, but other people run. It could be from real estate, or it can be from different investments. Freedom means that you know how to build a business system and use other people’s time and money to create passive income for yourself. It also means that as a big business owner or investor you can take advantage of the many tax breaks offered, which leaves more cash in your pocket.
Money Cannot Be Seen With Your Eyes
Mr. Kiyosaki argues that money cannot be seen with your eyes. The reason for this is that using your eyes equals using your emotions. The pretty dress, the snazzy shoes, the slick-looking car. Your visual senses draw you in and your emotions of wanting take over.
The contrast to this is seeing money with your mind. Pursuing financial literacy, understanding real risk, knowing definitions and systems of numbers (ie. interest rates). Becoming smart about money and financial systems will allow you to approach want / need / spending / saving in a different way. It’s all about due diligence. Facts are greater than opinions, and greater than emotions. Be knowledgeable, not emotional.
These are just two key take-aways that I came away with from the book ‘Cashflow Quadrant’ by Robert T. Kiyosaki. If you’ve read ‘Rich Dad, Poor Dad’ a lot of these ideas may not be earth-shattering, but I feel it all comes down to education. This is a fairly easy read, and if it gets you thinking about your finances and leads you to other books / other trains of thought then it’s definitely well worth it.
For those with not as much time, I have provided a link below to YouTube, where Mr. Kiyosaki quickly goes over the four different cashflow quadrants. Once you view this video, you will find quite a few additional links to other cashflow quadrant videos.
So what do you think? Are you pursuing security or freedom? Do you see money with your eyes or with your mind? Let me know your thoughts, and thank you for visiting.
YouTube: Robert Kiyosaki – Cashflow Quadrant (click here if video below does not appear)