Robert Kiyosaki has a lot to say about accumulating wealth in his book Rich Dad Poor Dad. I do believe a lot of it is garbage but the one thing that I do believe and understand is about changing your mindset when it comes to your life goals and wealth accumulation. The most intriguing concept to me is ” The Cashflow Quadrant”. This table is divided into four areas. There is the E & S on the left side and the B & I on the right side. The goal is to change your mindset and try to think in a way to move yourself from the left side to the right side.
- E Stands for Employee or employment
- S Stands for Self Employed
- B Stands for Business Owner
- I Stands for Investor
The goal is to move your thinking and wealth accumulation from E to S to B to I.
The left side of the table is what I would call active income. An employee working at a job. Every day you start from scratch and trade precious time for money. It doesn’t matter what your income or salary is, from a blue collar to a white collar employee it’s still active income.
The right side of the table is passive income. This is when you can make money on vacation or sleeping in bed. Passive income includes investments like Real Estate, rental property income, stocks and bonds. Also, being a business owner, instead of having to be at the place of work you have the E side of the quadrant working for you.
So the goal is to eventually get to the “I” quadrant where you can retire and accumulate wealth because your money is working for you. Another reason to get to the right side of the quadrant is there are usually tax benefits that favor large businesses and investments. Most of us will never get to the “I” quadrant but your mindset will help you accumulate wealth faster.