Financial freedom is everyone’s objective.
We want to experience a debt-free life where financial struggles are non-existent.
It’s a noble goal, but how many of us are willing to do what it takes to get there?
You’ve probably either read or heard about Kiyosaki’s book Rich Dad, Poor Dad. The Cash Flow Quadrant is the sequel that takes the principles he learned from his rich dad to the next level.
The Cash Flow Quadrant demystifies the process of achieving true financial freedom. There’s truly no shortcut on the road of financial stability and wealth generation. However, there’re some fundamental principles that can help you get there faster.
5 Takeaways from The Cash Flow Quadrant
- People in each quadrant think differently. Moving from the left to the right side of the quadrant requires a mindset shift.
Financial freedom comes through moving from the left side of the quadrant, where you’re either an employee or self-employed, to the right side of the quadrant where you’re either a business owner or investor. It’s possible to operate in two or more segments of the quadrant but the real wealth comes from the B and I side. Employees and self-employed business owners, however, tend to have a limited mindset filled with fallacies such as:
- I must work extremely hard to generate wealth.
- I must go to university, get the highest possible degree and get a good job.
- I don’t have time to invest.
- I can’t learn how to invest.
- I must save for retirement.
Business owners create systems that generate income without them having to work in the system on a daily basis. The system works for them to produce money. Kiyosaki has created several systems in his lifetime, but his biggest successes have been with real estate and the creation of his financial education company. He makes money in his sleep!
Creating a business system requires you to think like a business owner; you have to be before you can have. Business owners don’t spend their lives killing themselves with work and reaping little or no rewards. They seize opportunities and make decisions influenced by logic instead of emotions.
The same is true for an investor. Many of us blindly trust the advice offered by financial advisers who, more often than not, are either employees or self-employed and don’t truly understand the world of investing; they’re just paid to offer you advice. Therefore, to truly benefit from the investor quadrant you must think like an investor. You have to learn the rules of the game before you can play it.
2. Risk is a fundamental principle of the right side of the quadrant.
You can’t expect financial freedom if you aren’t willing to take risks. Business owners build efficient systems by taking considerable risks. Investors build their wealth through taking risks. Kiyosaki described one of the most important lessons his rich dad taught him. His rich dad said, “To be successful as an investor or a business owner, you have to be emotionally neutral to winning and losing. Winning and losing are just a part of the game.” Learn how to take calculated risks and how to separate your emotions from your business and investment decisions.
3. Passion builds businesses, not fear.
Kiyosaki can sometimes seem to be someone who is difficult to emulate. However, I am going though something quite similar to what he experienced at a critical junction in his journey. He quit his job at Xerox. He also gave up his wallet producing business because he was no longer passionate about it. Where did this leave him? He no longer had a stable source of income and he and his wife were homeless. Yes, this multi-millionaire was dirt broke and homeless!
He called his rich dad one day saying that he wanted to quit. There were many times where he just wanted to give up and g back to a stable 9 to 5. His rich dad’s response was, “You can always quit. Why quit now?” His rich dad also encouraged him to recenter himself and reclaim his passion. Without passion, things crumble. It’s easy to quit and go back to what seems to be easy. However, it’s more rewarding to stick the course and develop that passion into something great.
4. Be, do and then have.
Kiyosaki recounted an important lesson he learned from a goal-setting workshop he attended. The presenter expressed that people often have the concept of goal-setting twisted. They focus on what they want to have rather than changing who they are to position themselves for what they desire.
For instance, you want to have a great body. Have you thought about who someone with a great body really is? What is the mindset of this person? What pushes this person to maintain that healthy body every day? Are you prepared to be that person and do what it takes to have that great body? You have to prepare your mind and put in the work before you can reap the rewards.
5. Smart negotiations are critical for sound investing.
Banks generate wealth by keeping people in debt. Any financial or business negotiation you enter should be structured so that you aren’t on the losing end drowning in debt that you can’t manage. Sure, you should use other people’s money to make money but you have to think logically about the deals that you’re making.
Kiyosaki was going to buy his first investment property. Initially, the deal was structured in a ways that would result in him losing $100 per month. The realtor pitched this loss as a way for him to get a tax break. Excited about this seemingly great deal, Kiyosaki went to his rich dad to tell him all about it. He thought he was losing $100 per month but his rich dad glanced at the contract and surmised that he would be losing $150. Also, the tax-break argument made no sense. Why would he enter a deal where he was losing? His rich dad helped him restructure the deal and he ended up earning $60 per month from the investment. Read the fine print, negotiate and get yourself the best deal!
The Cash Flow Quadrant is a book that you must have on your bookshelf if you’re serious about financial freedom. It will open your eyes to the truth about how the wealthy think and better position you to enter the right side of the quadrant. The ball is in your court.