The Cashflow Quadrant represents the different methods by which income and money is generated. This theory is designed by Mr Robert Kiyosaki from his famous book, 'Rich Dad Poor Dad'. The Cashflow Quadrant consists of 4 quadrants which represents the different types of career or situation you are in that dictates how you earn money.
On the top left quadrant is the E quadrant. The E quadrant stands for Employee. It means that you are employed in a company or organization, or in other words, you get a job. You work. And in return, you get paid from what you do by your boss. People who work in the government sector or a private company fall in this category, wether you are a waiter in a restaurant, a mechanic in a plant, or a manager in a corporation. The drawback of being in the E quadrant is that you greatly depend on your salary. Should you lose your job, you will not earn anything until you find another job.
Below the E quadrant is the S quadrant, which stands for Self-employed. Self-employed means that you work for yourself. Now these people differ from the top quadrant because they are entirely independent. They prefer to do things on their own. Good examples of a self-employed are mechanics who open their own workshop, plumbers who takes calls from customers through newspaper ads, doctors opening their own clinic, and lawyers in their own firm. These people are so good in what they do that they start their own business and look for their own customers rather than working for someone else. They are specialists. Obviously, he gets to keep all the profits. But the problem of being in the S quadrant is that the business depend on you greatly. If you get sick or are unavailable in your office, than there will be no business for the day.
On the top right quadrant is the B quadrant which stands for Business Owner. The term business owner means that the person owns a business or a corporation. Unlike the Self-employed who still have to work, business owners own a system, meaning to say that business owners have people working for them. They don't have to do all the hard work as they are the decision makers for the long-term goals of the business and signs the paychecks for their employees. They have accountants to handle the financial matters, they have the sales and marketing staff to sell their products, they have secretaries to take care of all the paperwork, and so on. A good example of a local business owner is Pehin Lau Ah Kok who owns Hua Ho Department Stores.
Finally, below quadrant B is the I quadrant. This is what Robert Kiyosaki calls it 'the playground of the rich'. The I quadrant stands for Investor. People in this quadrant do something not many other people do, which is making more money out of the money they give away. They invest their money. Instead of working for money, they let the money work for them. They buy stocks, they invest on property, and they do foreign exchange trading. Overall, they're playing with the numbers.
As you can see, when you compare the left quadrants E and S with the right quadrants B and I, you can surely tell where the rich people lie in. Obviously, the Business Owners and the Investors are the money generating quadrants, and that's where we should be if we want to be financially successful. But some of you might say "How is it possible for me as an employee to get to be in the Right side of the quadrant when I don't even have the skills, knowledge and a lot of money?" There's even a saying that you have to inherit a family fortune if you wish to be in the right quadrants. Problem is, you are not one of the Hiltons.
Well, turns out, nothing is impossible. People have been doing this for years. There are self-made millionnaires and billionnaires who started from the left quadrant. Employees can be investors if they know how to spend their money right, and the self-employed can become business owners over time should the business continue to grow. In short, everyone can start a business, and everyone can invest. It's all a matter of choice whether we want to do it or not. But if you wish to stick to being in the left quadrants for the rest of your lives, well, good luck climbing to the top.
