Hello friends, in today’s article, we see the book summary of Rich Dad’s CashFlow Quadrants: Guite to financial Freedom book written by Robert Kiyosaki. this book is part of Rich Dad Poor Dad’s book, this book helps you to achieve financial freedom in a simple understanding world.
Rich Dad’s Cashflow Quadrant:-
So many people only read the Rich Dad poor dad but not many people read this book and they miss this book. so In my opinion to start an entrepreneur journey, this book is as important as a rich dad poor dad book.
these books provide, how can we improve life financial life to get financial Freedom. so let’s start with this book’s summary, to learn important lessons from this book.
I promise this book give you the most valuable lesson about financial freedom. so this books dividend into three-part
so first part the author ( Robert Kiyosaki) about Cashflow quadrants in that we come and make money from different quadrants. (Rich Dad’s Cashflow Quadrant Book summary)
In the world, all people make money from these four quadrants. if your expenses are more than your income, then you should understand this quadrant, and move to the better quadrants.
If you don’t know, how these four-quadrant people think, then you don’t achieve financial freedom and how they live life.
So we have to understand this four-quadrant to choose the right one, to live a financially free life.
There are four quadrants
- E- Employment
- S- Self-employment
- B- Businessman
- I- Investor
so let’s start with E-employment
1) E- Employee:-
In the E quadrant, 95% of the world population comes, but they have 5% of the world’s wealth. These people are those, who have jobs and have a primary focus on Job security.
Friends, in this category, lots of people come because, from childhood, we learn and prepare for the job, We go to school, get a good grade to get a good job, and get job security. (Rich Dad’s Cashflow Quadrant Book summary)
so our parents only thought about jobs and we prepared for jobs. for the job, we take high school graduation higher education for more salary we do ph.D and they say, you live a happy life with your family.
so for this type of mindset, this category people have only one income source i.e. salary ( job) and they depend on that.
According to the author ( Robert Kiyosaki), staying in this category and getting rich is next to impossible. Because, in starting jobs, you have less salary and your expense is more.
In that, we have more desire, so we spend more money to fulfill the desire, when our salary increases then our desire increases, this cycle continuously running.
to fulfill this desire, people get into the loan trap, and they pay the whole life their EMI. and this person never thinks about the Investment. (Rich Dad’s Cashflow Quadrant Book summary)
Because, their main aim is to get Job security, as compared to financial Security. These people need continuous income because, they have to pay the EMI on House, car.
this type of mindset people in live the E quadrants, so many of you also come in this quadrants,
now let’s see second quadrants,
2) S- Self Employed:-
In this category, these people come, like doctors, lawyers, small shop owners, etc, so these people sell their time and make money.
These people work for tips, the only difference from employees is that they don’t have their boss. they are own their boss.
Most people think they don’t do the job, but actually, they do the job for themselves. but the difference is they create their own job, and have small flexibility benefits.
if these people don’t work, they don’t get the payment. so, friends, these are two left-side quadrants, so both these quadrant people sell their time to make money. so for them, time is money.
if these people want more money then, they have to work more.
so now let’s see the right side of the cash flow quadrant. (Rich Dad’s Cashflow Quadrant Book summary)
On the Right side of the cash flow quadrants, comes, businessmen and investors
so let’s see the first businessman quadrants.
3) B- Businessman
In this quadrant, those people come, they have their own business, like bill gates, Steve Jobs, etc.
These people, only focus on hiring smart people to work for them to increase their business. if these people don’t have any money to run a business.
then they borrow the money and run their business to get maximum returns and pay off all debt.
they use OPT and OPM concept
OPT= means other people’s time
OPM= means other people’s money
According to the author( Robert Kiyosaki), these are the best quadrant to become rich, because, these people create a system they don’t just create a job for them life self-employed people.
to create a system these people have to do lots of hard work, and take risks so this type of sacrifice is only for the short term. after creating a system they start making money so for this, they hire employees, and
employees go regular in the company, and increases the business, without having a businessman in the company. (Rich Dad’s Cashflow Quadrant Book summary)
so now let’s see the fourth quadrant i.e. Investors
In this quadrant, people have the main focus to make money by doing investments.
These people’s money work for them.
Thie people mindset like, employee or self-employed give their time to make money, but investor mindset people give money for investment and make money.
So we can call them passive income
Friends, with the money we can buy the car, home same as we can buy the business or buy their piece of business in the form of stocks, and we also buy the other people time by giving them a job.
so buying other people’s time and money, to develop a business, actually makes you a financially free life.
Basically left side of the quadrant people actively work and they only get income when they actively work. so we say this income is active income.
If left side quadrants people don’t try to come in the right side of quadrants then they work until they die.
so for this warren buffet ( World greatest investor) says, ” If you don’t find a way to make money while you sleep, you will have to work until you die.”
Because our time is limited, everyone has 24 hours and we only work 8 or 12 hours a day.
if you are in the left side quadrant then you make limited income. if you want more money then you have to do overtime, so overtime also has a limit. (Rich Dad’s Cashflow Quadrant Book summary)
So now time to learn the important lessons to change the quadrant and become financially free
1) Changing Quadrants:-
friend,s most of the people in the worlds, come in two category, E and S because we prepared from school to college and you get a degree and you got the job easily.
but on the right side of the quadrant, you don’t need any degree, so if you want to be an expert, you have to learn and do self-study.
and for this, you have to think differently and you have to change your mindset completely.to change the mindset, you can refer to this quote
in this right side quadrant, Need zero degrees but Need a degree to work for them.
According to Robert, most people don’t change their quadrant is because of fear.
In the left side quadrant peoples, income continuously comes and on the right side quadrant, people don’t have continuous income, if businesses fail, investments go down.
so left side people think if I fail then how I pay my loan. so they don’t change the quadrant. and stay a lifetime in the same quadrant.
In school, we learn, making mistakes is bad, and we get punishment by making mistakes, we always give the right answer to get a good grade, so that’s why we do not fail, and we don’t learn about how to handle failure. (Rich Dad’s Cashflow Quadrant Book summary)
so we have more fear of failure, because, we don’t learn in school, or in life.
So for fear, the author says ” when the fear increases, people silently pick job security.”
instead of financial security and live average life, without understanding the long-term danger of the job.
wise people know, If we don’t take risks in life life is risky.
life is risky, without risk
so in life, you have to understand the difference between risk and risky.
Business and investment have risks, but they are not always risky. You don’t have the knowledge of business and investment that’s are actually risky.
if you don’t have the right knowledge of investment then you buy the liability and think it an asset, we buy.
you have fix mindset, you don’t learn much, if someone gets you advice, then you argue with them. so that’s are riskier.
2) Your Today, decide Tomorrow:-
Your daily actions matter. e.g. if you eat daily junk food, in sometime later you get an unhealthy body.
Friends, whatever, you make a decision today, their result is not necessary to see today. but in school, we get results after giving the exam in one month.
We have a habit of instant results, so whatever you make a decision now, that gives the result in after 10 or 30 years of life.
When you come from your job, and you get tired, and you think, I need some cold drink to refresh and this weekend I going to a party because I do this much hard work. (Rich Dad’s Cashflow Quadrant Book summary)
if you spend all your salary on your party and enjoyment, then you don’t have money to invest.
so you always stay in the rat race. and this rat race, get more difficult when you get old, and leaving this race and developing new habits is impossible.
when people come to that age their financial condition becomes more weaken, then they start to see the rich quick way and they want to become an overnight millionaire.
they search for stocks tips to get more returns in short term.
If you really want financial security and financial freedom so for this you have to change your mindset and improve it instead of changing the outer side and so for this process, you don’t have any shortcut.
You have to develop long-term thinking.
the author tries to say, for those people, who come from poor family backgrounds.
Those people who become the self millionaire, have three qualities
- they always think long term and plan for the long term.
- They believe in delayed gratification means, sacrificing short-term enjoyment, for long-term happiness.
- use the power of compounding for their benefit.
so those people are unsuccessful and from rich families they become poor. they have three things in common.
- They think for the short term.
- they fulfill their desire very quickly ( instant gratification) e.g. if they want the car, home, they buy it, if they don’t have money they buy on loan.
- they abuse the power of compounding by taking loans.
3) Use the job. don’t let the job use you.
The author says, ” You don’t have to look for a secure job. because, nowadays, job security things do not exist.
and the most important thing is job security is an illusion. ( we don’t have control over the job)
In our control, have financial security, so we have to focus on controllable things like you don’t have money to invest then you can start the business. (Rich Dad’s Cashflow Quadrant Book summary)
Whatever happens, success-failure, in business, you learn a lot.
if you don’t start a business, then use your job and start investing in an existing business, that is listed on the stock market in form of SIP, that’s your control.
You can live on rent so you don’t need to spend money on furniture.
this thing works slowly,
you hear a quote, i.e. A journey of 1000 miles begins with a single step.
but the author says, ” A journey of 1000 miles begins with a Baby steps
like baby, when you take a step, you have self-doubt and yo afraid to make steps, but like baby, you have to do and don’t afraid to fail,
4) True Wealth:-
Most people have many things to look rich like expensive cars, houses, but actually, they are broke.
they buy this expensive thing on loan. they don’t have many assets, and they are all expensive things buy on liability.
so they have to pay interest and principal amount also.
If you really calculate true wealth, you have to ask questions to yourself.
” how many days can this fool survive without an income? before starting to ask for help.
True wealth is the number of days you can survive without physically working and still maintain your standard of living.
if people buy other things like liability then you don’t save much. so these people look rich but they have always expenses to pay regularly. (Rich Dad’s Cashflow Quadrant Book summary)
these people have expenses forever and income is temporary.
so if you want to be rich, then you can use your left-side quadrant income to shift to the right side of the quadrant.
lastly, the author says,
It’s not how much you learn, it’s not how hard you work, who you do with it, how you do it, how much you keep for yourself, and how hard it works for you matters
so, friends, this is a book summary of rich dad’s Cash flow quadrant: a guide for financial freedom.
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