3/24/2024 0 Comments The 4 cashflow quadrants![]() Where my previous employer maintained the office and paid all my business expenses, those concerns were suddenly squarely in my corner. And with that step, I went from one quadrant – Employee – over to another – Self-employed. Taking the buyout as my cue to leave, I co-founded a financial planning firm with three other financial advisors. And that largely happened because my employer had been bought out. It took me five years being an employee before I finally made the jump. Will you need a building to operate out of, hire employees, or do you need vehicles or other specialized equipment? These hurdles are probably what keep more people from becoming self-employed. There will also be questions about specific tactics. As well, you’ll have to figure out how you’re going to get paid for doing it. More specifically, you’ll have to determine what products or services you’re going to provide, and who you’ll offer them to. ![]() You must decide exactly how you’re going to become self-employed. This is an understandably scary step for people. If I was ever going to move to the wealth-building side of the Cashflow Quadrant, I was going to have to shift to Quadrant #2. And while I felt like I was building a business (it was a mostly commission-income situation), I still had a boss as well as the risk of being fired. That meant my income potential was limited. Very few people ever get rich going this route. After all, it’s safe and relatively predictable, and can even provide a comfortable living. On the positive side, I had regular hours, a steady paycheck, and important benefits, like health insurance.Īll those advantages are why most people stay employed through their entire working lives. When I graduated from college, I got a job in a brokerage firm. And if you’re not actively working, you’re not earning any income. Translated, it means you can only make so much money. The basic limitation is that you only have so much time. But it’s where I was when I read Rich Dad, Poor Dad.Īs an employee, you’re trading your time for money. It’s the standard advice, but it’s far from the best path toward building wealth. You go to college, get a degree, get a job, hopefully stash money in your retirement plan, then retire when you’re 65 or 70. It’s what people are trained to do, and the course most follow. That’s because each enables you to leverage people and money to increase your wealth, even while you’re busy doing other things. Your first steps might include learning more from Kiyosaki and RichDad, or contacting me and my team of Wealth Advisors to assist you in implementing the proper financial strategies that meet the “Four Wealth Objectives”.The second two, Business Owner and Investor, are on the “rich side” of the Quadrant. If you’re reading this and have decided that you would like to begin moving from the Employee and Self Employed/Specialist side of the Quadrant over to the Business and Investor side, we encourage you to begin taking the necessary steps to begin. ![]() The good news is that you can become wealthy within all four areas of the quadrant. In fact, Warren Buffett says that he pays a lower tax percentage rate than any of the other areas because he is a Business Owner and Investor. The Business and Investor side of the quadrant has the most favorable tax treatment of the four quadrants. This is maybe the most difficult to fully attain, however it provides the greatest sense of financial freedom. I = Investor: This person invests in assets that generate cashflow, as well as increases in value. This generally allows a greater sense of flexibility and freedom. The game illustrated to him principle techniques like getting 4 Green houses and 1 Red hotel, thus teaching him to become an entrepreneur or investor.ī = Business: This entrepreneurial person hires Employees that work to generate a cashflow and increase the value of the business. It was Kiyosaki’s rich dad that began teaching him using the game of Monopoly. However, they typically have more influence over their income. This person, much like an employee, has to be present to get paid. S = Self Employed or Specialist: This may be a doctor, lawyer, technician etc. Yet we are all taught to go to school and get a good education so that we can get a good “job.” The employee model has pressures associated with it, as well as the worst tax treatment of any of the four types. As we describe each, I encourage you to identify which area generates your primary income?Į = Employees: Those who work for others and are told what income they are paid. There are certainly many social and lifestyle differences, but throughout the world each group has very different economic implications including tax treatment. ![]() So let’s discuss how each type of person differs. This concept was developed into the Cash Flow Quadrant. Robert Kiyosaki was taught early in life that there are four different types of people in the world.
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