The much-acclaimed book written by Robert Kiyosaki and Sharon Lechter focuses on the importance of financial independence and building of wealth through various means such as investing, creating a business and learning more financial literature. All of this would serve to educate the reader of the importance of such steps in order to truly become free from monetary constraints in life.
In his book, Robert Kiyosaki focussed on one thing -- the cash flow quadrant. There he categorised the four different types of people in the business world – the employer, the employee, business owners and investors. He splits these four groups into equal parts of the quadrants, with employee and business owners in the top two quadrants, and solo employers and investors in the bottom two quadrants. He further emphasises the different characteristics that each possessed, that may apply to you.
The employee is always the poorest of them all, with little freedom at the cost of having safety and security with their perceived “benefits”. If you’re an employee, you will soon realise that no matter how hard you work, your fulfilment in the job will never be enough as your contributions are for the company to reap and you will always be a liability.
As you move up and become an employer or a small business owner because you simply want it to be done right the first time and by yourself, you start becoming a solo player. Operating on your own, you may or may not make it rich and you sacrifice the security and safety of an employee. However, it is the stepping stone to becoming something bigger, like a business owner.
A business owner is technically an employer that has more than 500 employees and hold big businesses. They want the very best to run their company and their visions and ideology are somewhat different from the average worker in town. The difference between a business owner and the solo practitioner is that the business owner understands that he isn’t the best at the job and will want his company or vision to be run by the best.
Finally, the investor is totally different from all of the other three quadrants. Not only is the investor financially comfortable, he is free in his pursue because of his position. The investor possesses great amounts of financial literacy and uses them to his advantage by making the money work for him. This is opposed to the business owner that makes people work for him, and the employee who works for others. Being an investor in a sense may not require much capital because you can always start with whatever you have on hand. The goal for everyone would be to achieve the right-hand side of the quadrant, meaning being a business owner and investor at the same time. We want to have financial liberty AND freedom to pursue our leisure activities and hobbies at any single point in our lives. With both investing and owning a business, we can ensure a steady flow of passive income coming in as long as we are willing to put in the hard work at the beginning of time.