Robert Kiyosaki’s “Cash Flow Quadrant” identifies 4 ways we can generate income. Which quadrant do you receive your income from?
Once you’re retired, how will you receive your retirement income?
Why do 41% of households in the 55-64 age group have no retirement savings at all? How is this possible? In the richest country in the world, how is it possible that so many people have not saved any money?
The ONLY thing our parents taught us about money was to save it! Do remember that?
Do you remember your parents telling you over and over to “save your money”? Why didn’t it work?
Four Ways to Produce Income
I’ll tell you why… it’s because at the start of your journey to wealth your focus was on making more money… not saving it!
The fact is, there are four ways to produce income…
- Employee
- Self-Employed
- Business Owner / Entrepreneur
- Investor
We’ll start with the first one… the employee. Robert Kiyosaki talks about his poor dad saying to ‘go to school, get good grades and look for a good job.’ Neither our parents nor the education system taught us how to actually make money.
Trading Time for Money
We were being programmed to trade time for money by finding a good job. My question to you is would you rather get paid based on the value you provided or get paid based on the time spent at your job?
(Also, when you receive a salary, you are getting paid with the most heavily taxed form of income.)
Next, as self-employed you have the potential to have a little more control over your income. However, you’re still trading time for money. And in many cases you’re running an adult day-care center with the employees you’ve hired to help you run your business.
How would you like to get paid paid on your performance? Then, you might enjoy commissions and bonuses. It’s how your company can reward you for superior production. Effectively, the more money you can make for your company, the more money you can make for your family.
Revenue generating activities are always tied to the commissions and bonuses you receive. If you want to make more money then you will need to make more money for your company.
Ask around and see how many people actually want to work for commission? Are you willing to tie your income 100% to the revenue growth of their share of the company?
Few people want to work for commission because most aren’t willing to do the things they need to do consistently to stay highly productive. It’s much easier to do just enough to get by.
Both the Employee (E) and the Self-Employed (SE) require you to be on the job working, trading time for money. Meaning if you’re not there, you don’t get paid. And there is definitely significant effort involved to earn money. And if you never move out of those two quadrant, you will NEVER retire!
Can you see that? Can you see how it’s virtually impossible to remain in the employee or self-employed quadrants and retire? Because they both require you to be ‘on the job’ working.
Rich Dad vs Poor Dad
Robert Kiyosaki talks about his rich dad saying to…
Go to graduate school, build a business and become a successful investor.
So, which makes more sense to you…
- Go to school, get good grades and look for a good job … OR
- Go to graduate school, build a business and become a successful investor
Which of Kiyosaki’s dads are you listening to? His Poor Dad? Or his Rich Dad?
If you really want to retire, (and I know you do), then you absolutely have to figure out a way to move out of the left side of the cash flow quadrant into the right side as an business owner or entrepreneur and ultimately as an investor.
So, the bottom line…
If you’re an employee or self-employed, what are you doing to become a business owner / entrepreneur or an investor. Ideally, you are putting money away into your retirement accounts and hoping that you have enough to retire.
If you’re a business owner / entrepreneur, ideally you’re developing your cash flows for life to support the life you see when you close your eyes and dream! And if you’re investor, I urge you to spend some time to determine just how you’re going to turn your pile of money into consistent, reliable income.
The quality of your retirement life will depend on the quality of your choices and decisions made throughout your life. Let me know how I can help. Enjoy!
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