What financial quadrant are you in? Discover how to change your destiny with Robert Kiyosaki's book
In this article, I am going to explain to you what the money flow quadrant consists of, what its advantages and disadvantages are, and how you can go from the least favorable quadrants to the most profitable ones, following the advice and strategies that Kiyosaki shares in his book. If you want to change your financial situation and achieve your financial goals, don't miss this analysis.
What is the quadrant of the money flow?
The money flow quadrant is a Cartesian axis-shaped scheme that divides the ways to legally obtain income today into four. These ways of making money are related to the mindset, behavior, income, and financial intelligence of the people who choose them. The four quadrants are as follows:
The employee quadrant (E):
In this quadrant are all those people who work for someone else, that is, who have a dependency relationship with a company or organization. These people trade their time for money and receive a fixed salary each month. Their main source of income is salaries.
The self-employed quadrant (A):
In this quadrant are entrepreneurs, independent professionals, consultants, freelancers and all those who have their own business and who depend on their own effort and ability to generate income. These people also trade their time for money, but they have more control and flexibility over their work. His main source of income is fees.
The quadrant of the business owner (B):
In this quadrant are entrepreneurs, system creators, team leaders and all those who have a business that operates without their physical presence and that generates income automatically or delegated. These people make money work for them and not the other way around. Their main source of income is profits from their businesses.
The investor's quadrant (I):
In this quadrant are investors, shareholders, lenders and all those who invest their money in assets that produce periodic income or capital gains. These people also make money work for them and not the other way around. Its main source of income is dividends, interest, royalties and capital gains.
According to Kiyosaki, the employee and self-employed quadrants are the least effective for making money and represent 97% of the population, while the business owner and investor quadrants are the most effective and represent 3% of the population. The difference between these quadrants lies in the level of leverage, that is, the ability to generate income without depending on time, effort or your own money.
What are the advantages and disadvantages of each quadrant?
Each quadrant has its pros and cons, and there is no one better than another, but it depends on the preferences, objectives, values and circumstances of each person. However, it is important to know the characteristics, benefits and risks of each one, to be able to choose the one that best suits your profile and your financial vision. Below, I summarize the main advantages and disadvantages of each quadrant:
The employee quadrant (E):
- The advantage of this quadrant is that it offers a certain stability, security and predictability, since you receive a fixed income each month and have some social benefits, such as vacations, bonuses, health insurance, etc. . In addition, little or no initial investment is required and credit and financing can be accessed easily.
- The disadvantage of this quadrant is that you have little or no freedom, autonomy and creativity, since you must comply with a schedule, rules and tasks imposed by a boss or an organization. In addition, you pay more taxes, you depend on a job that may be unstable or unsatisfactory, and your earning potential is limited, since you earn by the hour and not by results.
The self-employed quadrant (A):
- The advantage of this quadrant is that it offers more freedom, autonomy and creativity, since you can choose the type of work, the schedule, the place and the clients. In addition, you can express your talent, passion and personal vocation, and you can earn more money, since you are charged by value and not by hour.
- The disadvantage of this quadrant is that it involves more responsibility, risk and stress, since the entire business must be managed, from production to marketing, and costs and losses must be assumed. In addition, you pay more taxes, you depend on your own effort and ability, and your free time and quality of life are limited, since you work more hours and have fewer vacations.
The business owner's quadrant (D):
- The advantage of this quadrant is that it offers more leverage, scalability and profitability, since you can generate income without depending on time, effort or your own money, but rather using that of others. people, such as employees, partners, suppliers, customers, etc. In addition, you pay less taxes, you have more freedom and quality of life, and you can create a legacy and a positive impact on society.
- The disadvantage of this quadrant is that it requires a large initial investment, a high capacity for leadership, management and vision, and constant innovation and adaptation to the market. In addition, it faces strong competition, greater complexity and greater uncertainty.
The investor's quadrant (I):
- The advantage of this quadrant is that it offers maximum financial freedom, since you can generate passive and residual income that covers all expenses and allows you to live on compound interest. In addition, you pay less taxes, you have more free time and quality of life, and you can take advantage of market opportunities and trends.
- The disadvantage of this quadrant is that it requires great financial education, high discipline and patience, and good risk and emotional management. In addition, you are exposed to volatility, inflation and market manipulation.
How to go from the least favorable quadrants to the most profitable ones?
If you want to change your financial situation and move from the employee or self-employed quadrants to the business owner or investor quadrants, you must follow a series of steps that will help you transform your mindset, your behavior, your income, and your financial intelligence. . These are the steps that Kiyosaki recommends in his book:
Define your purpose and your financial vision:
The first thing you should do is be clear about what you want to achieve with your money, what your financial goals are, what level of financial freedom you want and what type of life you want to live. This will give you the motivation, direction and focus needed to change quadrants.
Increase your financial education:
The second thing you should do is learn everything you can about money, how it works, how it is generated, how it is invested, how it is protected, how it is multiplied and how it is used to create value. This will give you the knowledge, confidence and ability to make better financial decisions and to take advantage of opportunities that arise. You can increase your financial education by reading books, taking courses, attending seminars, listening to podcasts, following experts and mentors, and practicing with simulators or games.
Change your mentality and your behavior:
The third thing you should do is change your way of thinking and acting regarding money, work, risk and success. You must adopt a mentality of abundance, growth, learning and action, and leave behind a mentality of scarcity, fixation, fear and procrastination. You should focus on assets, not liabilities, on value, not price, on the long term, not the short term, and on the solution, not the problem.
Create or acquire a business that works without you:
The fourth thing you should do is create or acquire a business that allows you to generate income without depending on your physical presence or your personal effort. To do this, you must design a system that produces, distributes and sells a product or service that solves a need or problem in a specific market. You must surround yourself with a team of competent, motivated and committed people who are responsible for operating and improving the system. And you must delegate, automate and optimize processes so that the business runs efficiently and profitably.
Invest your money in assets that generate passive income:
The fifth thing you should do is invest your money in assets that produce periodic income or capital gains, without you having to actively work for them. To do this, you must diversify your investment portfolio in different types of assets, such as stocks, bonds, funds, real estate, business, cryptocurrencies, art, etc. You must analyze the performance, risk and liquidity of each asset, and choose those that fit your profile and objectives. And you should reinvest your profits to take advantage of the power of compound interest.
The money flow quadrant is a powerful tool that helps you understand how money works, how it is generated, how it is invested, and how it is used to create value. It also helps you identify which financial quadrant you are in and how you can move to the most favorable quadrants to achieve financial freedom. If you want to change your financial destiny, I recommend that you read Robert Kiyosaki's book and follow the steps that I have explained to you in this article. I am sure that if you do this, you will be able to improve your financial situation and live the life you want.
