GlycoBusiness - Cash Flow Quadrant


While most of us were growing up, we were taught to go to school, get good grades, find a career and retire at 65. This model doesn’t allow any of us to get ahead! We spend our lives living paycheck to paycheck and hope that we’ll be able to rely on Social Security or our 401k carry us through our “golden years”. According to financial experts, we cannot rely on our 401k and Social Security to be there for us when we retire! And even if you could rely on them, would they really provide you with the type of lifestyle you’d really like to be living when you retire? The truth is, the model of going to school, getting a career and retiring at 65 doesn’t work. If it did, you wouldn’t see so many seniors still working at 70+ to make ends meet! We’re going to explore another model – a model that does work! In Robert Kiyosaki’s best selling books “Rich Dad, Poor Dad” and “CashFlow Quadrant”, he explains how the rich don’t work for money – they get money to work for them. Let’s take a closer look at a model Robert Kiyosaki refers to as the “Cash Flow Quadrant”.

In the first quadrant, he assigned an E, which stands for Employee. This is the way that most of us make our money. Using this method, your life is controlled by the alarm clock. You have to go to bed at a certain hour so that you can get up when that alarm clock goes off. You go to work each day and trade hours for money. The problem with this model is that you have absolutely no way to get ahead! When you stop working, the money stops coming! To top it all off, as an employee you are paying more income taxes than any of the other quadrants and you’re in the highest tax bracket! You can always tell an employee by what they say… “looking for a safe, secure job and benefits.”

In the next quadrant, we’ve got an S, which stands for Self-employed. These are small businesses and specialists like doctors, dentists, plumbers, electricians, contractors, small retail outlets, attorneys, free-lancers, etc. These are the rugged kind. They look at what their employer is doing and believe they can do that too, maybe even better. They want to do it their way. So they start their own company and become self-employed. This model can be very deceiving because you’re STILL trading hours for money… If you stop working the money stops too. In this quadrant, you don’t own a business; you own a job. The only difference is, you have slightly more control over how many hours you work and you receive very few tax breaks. This is one of the hardest quadrants because the employees pick on you as well as the government, i.e., tax problems and employee problems. This is where the small business differs from the big business.

Take a look at others who have created their own big businesses such as Bill Gates, Michael Dell, Henry Ford and John D. Rockfeller. Each of them built networks and networks of systems. They hired smart people and as a result they were able to do more and more while working less and less.

The problem with the E and S side quadrants is that in order to make more money they often have to work harder. So the income potential for the E and S is very often capped or limited. The person in the E quadrant is usually capped out at around the $30,000 to $65,000 a year income mark and the person in the S quadrant caps out at around $110,000 to $125,000 a year.

As a Business Owner, you’re no longer trading hours for money. Instead, you have a system built and people are working for you who are making you money – even when you’re not there! The B quadrant people can make more money than rock stars, sports stars, and movie stars if they get their thinking straight and set up business right. Their income potential is virtually unlimited because networks are unlimited.

Most people, when thinking of investing, gravitate towards the stock market. But the rich don’t invest heavily in the stock market; they put their money in other vehicles. This person makes their money work harder than they do. As an investor, you no longer work for money, but rather, you have money working for you!