Cashflow Quadrant

Cashflow Quadrant, a concept popularized by Robert Kiyosaki in his book “Rich Dad Poor Dad,” presents a compelling framework for understanding the different ways individuals earn income and achieve financial independence. This quadrant is divided into four distinct categories: Employee (E), Self-Employed (S), Business Owner (B), and Investor (I). Each category represents a unique approach to generating income and managing finances.

The ‘E’ quadrant refers to individuals who earn a salary by working for others. They value job security and consistency in income. The ‘S’ quadrant includes those who work for themselves, such as freelancers or professionals running their own practice. They trade time for money but have more control over their work.

In contrast, the ‘B’ quadrant represents business owners who leverage systems and teams to generate income. Their focus is on creating and scaling businesses that operate independently of their time. Finally, the ‘I’ quadrant consists of investors who earn passive income by investing in assets like stocks, real estate, or businesses.

Understanding the Cashflow Quadrant is crucial for anyone seeking financial freedom and wealth, as it provides insights into the mindset and strategies required to transition from being dependent on a job to achieving financial independence.

The book known as “CashFlow Quadrant” was authored by Robert Kiyosaki, a well-known best-selling author of the book known as “Rich Dad Poor Dad.” The CashFlow Quadrant has been described as a powerful hand-guide for any person that is in search of financial freedom. In this book is also the story on how this mentor “Robert Kiyosaki” went from homeless in the year 1985, to becoming a millionaire by 1989. It also explains the steps that he took in detail, and how readers of this book can achieve the same success in a lot less time.

Here is a summary about the book known as “CashFlow Quadrant” Rich Dad’s Guide to Financial Freedom.

Today there are not many books available on the markets that have the ability to change your overall life or the way that you currently think. Yet many reviewers of this book have agreed that this may be the one that can really change your life in a dramatic way. Here is information on what this book has to offer and about who Robert Kiyosaki is. It will also give you more information on whether you may want to try this book for yourself.

cashflow quadrant

Who Is Robert Kiyosaki?

The man known as Robert T. Kiyosaki is an educator, entrepreneur, and innovator. In summary today, he is known as a multi-millionaire business-man, with a primary goal to educate others about investing, money and business.

Kiyosaki, has not always been so successful. In fact, when he was in school he really struggled and even failed English twice. His Dad (known as poor dad) was at the time an educator who strongly believed that you need to obtain a good education first and then a good paying job. But Robert’s Rich Dad (the best friend to his dad) believed that school was unable to teach the things that you should know about money and about getting rich.

On leaving school, Robert joined up with the U.S Marine Corp. He made this decision because he believed that joining the armed-forces would give him the lessons he needed about becoming a leader as well as develop him spiritually and mentally which is something that formal education was unable to give him.

In 1974, when he finally left the Marine Corps, he obtained his first job with a company known as Xerox, with the aim of not wanting to climb up a corporate ladder, but rather because he already knew this company offered a top-rated sales training program, which all formed a portion of his Rich Dad’s education.

In the year 1977, he formed his very first business which involved manufacturing. He happened to be one of the few companies of this time to produce Velcro and nylon surfer wallets which were available in vibrant and bright colors. He decided to close the doors to this business because he was unhappy about the way that this business was run in association to his workers overseas that were underpaid, and he believed they were being exploited. This caused his passion for this business to diminish.

Robert along with his wife then experienced many dark days over the next few years, which involved living in motel rooms and out the boot of a car. However, he sees this time as the point where he learned valuable lessons and the fact that it is Ok to fail. He also believed that it is what you are able to learn from these experiences that will shape you into a person that you will become.

Today he is a highly successful educator and business man, with his number 1 bestselling book known as Rich Dad Poor Dad appearing in the New York Times top 10 for over seven years. He was also awarded with an honorary PHD entrepreneurship in 2009.

He continues as a highly passionate advocate when it comes to power, and importance associated with financial education. Today, with the record home-repossessions, the global economic-meltdown which is still going on, his teachings appear as prophetic and enlightening, with many of the nay-sayers and sceptics now becoming strong believers of what he has to say.

CashFlow Quadrant break-down

The Cashflow Quadrant involves a breakdown of 4 income types. These include E for Employee, S for Self-Employed, B for Big Business Owners and I for Investors.

E- Employee

In the form of an employee, it means you are employed and you have a Job. This section makes up most of the populations. It is within this category that you are trading time to make money. This also means you are working typically between 40 to 80 hours every week in order to get paid. Some examples of these positions include a banker, engineer, secretary, plumber, teacher, doctor, pilot, nurse of even a CEO for a company.  In the role of an Employee, you pay out the highest in taxes, while still continuing to trade your time to make money. As soon as you stop working, your salary also falls always.

S- Self Employed

In the role of Self-Employed you own your Job. The insurance agents, real-estate agents, accountants, consultants, lawyers and doctors that own a practice, along with the smaller business owners fall into this category. In this section you will also be trading your time to make money. In many cases you might work longer hours compared to the Employees and you will not have any paid vacations. When you are no longer working, your income also stops, and making money is solely dependent on you. Most of the Big Businesses usually start off their careers as Self-Employed. But they have a specific system in place.

B- Big Business Owner

B represents Big Business Owner, which Robert Kiyosaki describes as having 500 employees or even more. When it comes to Big Business owners they are in search of systems and they also make use of leverage. Unlike the Self-Employed category, these individuals do not run a company on their own. They seek a team made up of smart individuals that run the company on their behalf. The individuals who would like to be the “Big Deal” usually stay in the Self-Employed category.

The Big Business owners leverage work from others. They also pay the minimum in taxes and the business will continue to bring in cash-flow even when the individual is not there. In this section, you will usually work hard over the first few years of the business and then usually obtain a passive income which continues even when you retire.

I ” Investors

The Investors are the type of people who find a way to make their money work very hard for their benefit. The majority of the genuine investors obtain initial income through the B category. Similar to the Big Business owners, the Investors also pay far less taxes in comparison to the Self-Employed and Employees.

The core thoughts of individuals in the B and I categories is entirely different to individuals in the E and S categories. One of the stand out differences of people in the E and S categories is that they think Time = Money, while people in the B and I categories believe that Thinking = Money.

How To Make A Profitable Real Estate Investment

In the CashFlow Quadrant, you will find out about the “Insider’s secrets” on how to become financially free. A few of these lessons include:

The 3 types of Business Systems you are able to build:

– The differences between being wealthy and being rich

– The differences between the B type business and the S type business

– Ways to manage risks

– The importance of opinions versus facts

– The reasons why people financially struggle

– Ways to get rich

– How to become the Bank and not the Banker

– Ways to become a successful Investor and Business Owner

The most valuable lessons that you can learn from the CashFlow Quadrant include the following:

Your Boss Will Not Make You Rich

This is probably one out of the more important lessons inside this book. You will find many people trying to find a way to become rich from their salaries. Yet, the truth is that it is really difficult and usually impossible to get rich from a salary. In processes of trying to become rich off a salary, most of these people are breaking a law with money that states, “Don’t ever try to get rich on your salary”.

When you start to realize that a boss does not perform the role of helping you to get rich and is rather there to ensure you receive a steady pay check. Having a job will rarely ensure that you become rich yet building your own business will.

This is an essential lesson for the majority of people because most of these individuals dream about finding that “high paying” job, saving the money they make which will make them rich. If you want to learn the basics of obtaining wealth without earning a pay check, you should definitely read the CashFlow Quadrant.

You Need To Build Your Business System Around What You Are Passionate About

This is a lesson that is applicable to the lives of the entrepreneurs. Many entrepreneurs are known for starting up a new business venture with a lot of passion and excitement and over time they start to lose enthusiasm and interest and the business starts to crumble. There are also the entrepreneurs that are constantly looking for a new product every month, and the best products that they should be marketing. Yet they cannot understand that are failing to make headway.

If you fall into the category of the entrepreneurs, you need to be building your business around what you are passionate about. If you look into the backgrounds of the most successful entrepreneurs, you will usually find that they all built up their companies around their true passions.

For example, Steve Jobs, Bill Gates, Michael Dell and Larry Ellison all built their businesses associated with their passion, which included “Computers”. While Mark Zuckerberg, Jerry Yang and Larry Page, built their business systems around their passions which is the “Internet”. If you are interested in building a business that is successful, you first need to find out what your passions are and then build your business around this.

You Need To Watch The Words You Are Using

After you have read the book the CashFlow Quadrant you will come to learn that there happen to be specific words that are used by employees, business owners, self-employed and investors. You will also learn that words that we use have an effect on our lives in an unconscious manner because words happen to be incredibly powerful tools.

If you are interested in becoming a successful investor or business owner, then you need to first learn about and then make use of the specific vocabulary that investors and business owners use.

Every person in some way desires financial-security and most us have dreams about attaining financial freedom. The CashFlow Quadrant teaches principles of cash flow, assets and income. Understanding these different methods on how money or income is generated and how it is used is in summary what the book CashFlow Quadrant is all about.

Cashflow Quadrant Infographic

Below are the steps to take to make the most out of the CashFlow Quadrant:

Learning About The Concepts Of The 4 Individuals

The premise for the Rich Dad, Poor Dad book series involves that the world of business involves 4 individual types:

– E- Employee- has a job

– S- Self-Employed- owns a job

– B- Business Owner- owns a type of business system

– I- Investor- has found a way to make their money work for-them

Identifying Where You Are Currently

Finding about where you fall in the CashFlow Quadrant is achieved by looking where the majority of your current income is coming from. What will affect what quadrant we make a decision on where to generate an income from will be associated with internal differences linked to our interests, core values, life stage, outlook etc.

Make A Decision On Where You Want To Be

The traditional schooling systems teaches us mainly to focus our energy, time and thoughts on either becoming an Employee or a Self-Employed individual such as an accountant, lawyer or doctor. While these ideas may not be wrong, it will become an issue when your main goal is to achieve financial freedom. In fact, financial freedom will rarely be found within the E and S quadrants.

Make A Decision If Financial Freedom Is What You Want

The words “financial” along with “freedom” will always go hand-in-hand. You will never be truly “free” in the world that we live in today unless you become financially free. The purpose of this life involves generating and experiencing more life. It is money that will allow for a way to “live” more of a life. It is financial freedom which means you have obtained enough wealth which involves cash-flow and assets, that will allow for a way to live more of a life on a more substantial basis.

– Changing from quadrant into another is explained as a life-changing experience that will in most cases necessitate fundamental shifts in your core values

– This will also require significant personal transformation and massive action. This means you need to be open to stepping outside of your current comfort zone. Once you have managed to cross over from the left side of the quadrant which contains the Employees and the Self-Employed into the right side of the quadrant which contains the Business owners and Investors there is usually no turning-back.

Gaining Financial Intelligence

Obtaining financial freedom necessitates a high level of financial intelligence. To begin your journey towards financial independence, you must be willing to move beyond the job security in the E quadrant. Be aware that it’s going to be a turbulent and treacherous journey, which must be managed with care. This isn’t a step to be taken if you want merely normal, safe times. Yet, for those willing to make this leap, the ultimate goal of this expedition is to achieve financial independence.

Becoming Aware Of The Risks Involved

It is also important to know that success is never guaranteed. An example of this is that around 80% of the business start-ups usually never make its to their 5th birthdays. In addition, of the business that do go onto success, there are many successful business owners that end up losing their money through the over-confidential forays within the Investor quadrant. This road and journey to reach financial freedom will be full of people and casualties who make the decision to turn back on the goal due to fear.

Obtain The Skills That You Need

Most of the skills needed to reach success as a Business Owner or an Investor are usually not taught in a school. In fact, it is very interesting about how many of the most successful businessmen actually never finished school and obtained their real-education through the thrust and cuts in the business-world.

The more successful of the business owners are usually innately curious, thirsty for knowledge and uncompromising when it comes to their pursuit associated with each of their goals. They often choose to learn more through Mentors, they attend educational seminars and training courses, they also read voraciously and the convert all this knowledge into actions.

The rules are completely different in each of the quadrants. They are also entirely different in their words, and also require different skills, behavior, tools and mindsets. The act of continuous education and learning will become a constant bedfellow when it comes to assisting you on your journey through each of the quadrants.

Who Is The CashFlow Quadrant Book For?

This book has been written for the individuals that really want changes in their lives, especially for people within the E and the S Quadrants that have become tired of being a “slave to money” and would like to know how to change over into the wealthy side of the B and I quadrant.

This book is broken up into three important parts:

  1. Part-One shows you about fundamental differences between the individuals in each quadrant. It also gives you information on the reasons why some people naturally gravitate towards particular quadrants, and why they often become stuck. This section also includes where you happen to be right now, as well as where you would like to be within 5 years.
  1. Part-Two of this book revolves around change. It focuses on what the type of person you need to become so that you are able to achieve all your goals.
  1. Part-Three gives an explanation on the best way to transition from the left quadrant to the right quadrant. Here you will find out about the Rich Dad secrets on skills that you will require in order to achieve success in the I or B quadrant. It will also assist you in choosing your own path to achieve financial freedom.

Is cashflow quadrant worth reading?

Robert Kiyosaki is considered by many as a valuable read, especially for those interested in personal finance, investment, and understanding different paths to financial independence. The book builds upon the concepts introduced in Kiyosaki’s earlier work, “Rich Dad Poor Dad,” and is centered around the Cashflow Quadrant, a conceptual tool that Kiyosaki uses to categorize the different means people earn income.

The Cashflow Quadrant is divided into four types:

  1. E (Employee): Earning income by working for someone else.
  2. S (Self-employed/Small business owner): Earning income by working for oneself.
  3. B (Business owner): Earning income from owning a business that does not require the owner’s presence to operate.
  4. I (Investor): Earning income from investments.

Key takeaways and reasons why the book is often recommended include:

  1. Understanding Different Income Quadrants: It helps readers understand the differences between being an employee, self-employed, a business owner, and an investor.
  2. Mindset Shift: The book encourages shifting mindset from traditional employment (E or S quadrant) to owning businesses or making investments (B or I quadrant) for financial freedom.
  3. Financial Education: Kiyosaki emphasizes the importance of financial education and literacy as a path to moving towards the B and I quadrants.
  4. Risk and Reward: The book discusses the risks and rewards associated with each quadrant and how moving towards the right side of the quadrant (B and I) can lead to greater financial independence and wealth creation.
  5. Real-life Examples: Kiyosaki uses anecdotes and examples from his own life to illustrate his points, making complex concepts more relatable.

However, it’s important to note that while Kiyosaki’s books have been popular and influential, they have also faced criticism for oversimplifying complex financial concepts, promoting risky investment strategies, and the lack of practical steps for achieving financial freedom. Some financial experts argue that the advice is not universally applicable and caution readers to critically assess the advice given.

What is the lesson from cashflow quadrant?

Robert Kiyosaki presents several key lessons about financial independence and wealth building. The central concept of the book is the Cashflow Quadrant, a framework that categorizes the different ways people earn money. Here are some of the main lessons from the book:

  1. Understanding the Four Quadrants: The Quadrants are Employee (E), Self-Employed (S), Business Owner (B), and Investor (I). Each quadrant represents a different method of income generation and requires different mindsets and skills.
  2. Shifting Quadrants for Financial Freedom: Kiyosaki suggests that while most people start in the E or S quadrants, achieving financial freedom often requires moving to the B or I quadrants. He argues that being a Business Owner or an Investor allows for more control over financial destiny and the potential for passive income.
  3. The Importance of Financial Education: One of the book’s central themes is the importance of financial literacy. Kiyosaki argues that understanding financial concepts, investment strategies, and market dynamics is crucial for success in the B and I quadrants.
  4. Mindset and Approach to Money: The book stresses the importance of how different mindsets and approaches to money can influence one’s financial success. It encourages thinking beyond traditional employment and paycheck reliance, urging readers to seek financial independence through business and investment.
  5. Risk Management: Kiyosaki discusses the importance of understanding and managing risk, particularly in investments. He advises learning and gaining experience to make informed decisions, rather than avoiding risk altogether.
  6. Creating and Acquiring Assets: The emphasis is on creating and acquiring assets that generate income (like rental properties, stocks, bonds, or owning a business), as opposed to accumulating liabilities that cost money (like personal residences, cars, and other debts).
  7. Passive Income and Leverage: The book highlights the value of building passive income streams and leveraging other people’s time and money (in the B and I quadrants) instead of solely relying on personal effort for income (as in the E and S quadrants).
  8. Entrepreneurial Spirit: For those in the B quadrant, Kiyosaki emphasizes the importance of entrepreneurial skills and the ability to create and manage systems that generate income.
  9. Investment as a Skill: In the I quadrant, investment is not just about having money to invest; it’s about having the skill to make money work for you.
  10. Long-Term Perspective: Building wealth is presented as a long-term game, requiring patience, persistence, and continuous learning.

“Rich Dad’s CASHFLOW Quadrant” encourages readers to think about their approach to earning money and investing, urging a proactive attitude towards financial education and wealth creation. However, as with any financial advice, it’s important to consider these lessons within the context of one’s personal financial situation and goals, and to balance them with other perspectives and advice.

Cashflow Quadrant Concept Illustration

Why is the Cashflow Quadrant important?

Its importance is emphasized in the following sections:

  1. Various Income Sources and Mentalities: In The Quadrant, there are different types of income – Employee (E), Self-Employed (S), Business Owner (B), and Investor (I).
  2. Path to Financial Freedom: The Quadrant provides a framework for understanding the paths that can potentially lead to financial independence. Kiyosaki argues that while employees and self-employed individuals trade time for money, business owners and investors earn passive or residual income, which is more scalable and can lead to greater financial freedom.
  3. Encourages Financial Education: The model emphasizes the importance of financial education and literacy. It suggests that understanding how different quadrants work can empower individuals to make more informed decisions about their financial strategies and investments.
  4. Risk Management and Investment Skills: The Quadrant underscores the importance of developing skills to manage risk, particularly in investments. It highlights how investment is not just about having capital but also about having the knowledge and skills to grow that capital effectively.
  5. Shift in Perspective: It encourages a shift in perspective from solely earning income through employment or self-employment to considering other forms of income such as business and investments, which can potentially offer more freedom and financial growth.
  6. Identifying Personal Strengths and Preferences: The Quadrant helps individuals identify where their strengths lie and what type of income generation aligns best with their personal goals, skills, and preferences.
  7. Strategic Planning for Wealth Building: By understanding the characteristics of each quadrant, individuals can strategically plan their transition from one quadrant to another, aligning it with their long-term financial goals.
  8. Adaptability to Economic Changes: The model suggests that having multiple streams of income or being able to move across different quadrants can provide a buffer against economic changes, job loss, or other financial setbacks.
  9. Understanding of Leverage: In the B and I quadrants, leverage (using other people’s time, money, and resources) is a key concept. The Quadrant highlights how leveraging can be used to build wealth more effectively than relying solely on one’s own efforts.

The Cashflow Quadrant is significant because it offers a conceptual map for navigating personal finance and wealth creation strategies. It encourages individuals to broaden their understanding of how money can be made and managed, urging a proactive approach to achieving financial independence. However, it’s important to critically assess and adapt these concepts to one’s unique financial situation and goals.


The book is especially for those that are tired of their secure and safe 9 to 5 job and are interested in building their own pipeline to financial freedom and success. The book will not contain every answer you may be searching for but does provide answers on how to make the changes in your own life.

If you think that you are prepared to move away from job security and discover your own road to finding financial freedom this is the ideal book to try. This book has taught many people about making professional and deep financial changes in their lives. You will also learn about new direction, new options and a way to move away from this industrial age and rather into the information-age with a different type of financial future to look forward to.