How we earn money

If you have ever read anything by Robert Kiyosaki, then you are familiar with the CASHFLOW quadrant outlining the 4 types of ways to make money. They are: being an Employee, being Self-employed , being a Business owner and being an Investor.

The terms “self-employed” and “business owner” are often used interchangeably. Technically, they are not the same; they are actually two different ways to make money. However, they do stem from the same dream in people’s hearts.

Take this real-life example. You work for a company installing HVAC systems. You show up for work, perform the job, and receive your paycheck at the end of the week. You are earning money as an employee in the E quadrant. One day, you decide to venture out on your own and start your own HVAC installation business. You secure clients, hire some employees, perform the work, and get paid at the end of the week. You are now self-employed and earning money in the S quadrant. When you are in the E quadrant and the S quadrant, you are trading time for money, so they are both considered active income; the only difference is your boss.

When your business is doing well, you have a few crews installing HVAC systems and a couple of employees securing new clients. You do not need to be there and pretty much never are. No matter where you are or what you’re doing, your business is making money. You are now in the B quadrant. At this point, your business is very successful and you’re able to take the money you’ve earned and invest it into real estate, stocks, mutual funds and other businesses that produce multiple streams of income with little to no effort on your part. Congratulations – you have now made it to the I quadrant.

For the vast majority of people, entering the I quadrant is out of reach due to lack of finances. If you want to live on $70K a year, you would need to invest $1M at 7% interest to achieve it. The best way to change the course of their financial future is to find a way to enter the B quadrant as a business owner. However, most startups require more time and capital than the average person has available.

If the goal is to build an income stream so you can have time freedom and financial freedom, then starting a restaurant or coffee shop isn’t going to get you there. If your goal is to minimize risk, opening a brick and mortar business isn’t the right avenue, either. So where do you begin? Begin with your end goal in mind.

You have to be willing to explore other avenues to take you where you want to be. You should be looking for an existing business system that has low entry cost, low risk, a very high reward potential and a mentor who will help you do it the right way.

The 4 CASHFLOW Quadrants

Want to learn more?

Published by Entre Essentials

I work to connect people who want to be business owners with information. Interested people can schedule a consultation to see if owning their own business is the right move for them.

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