Most people put money into what looks good to them visually or emotionally, but the smart investor, creates their own picture of an investment from the numbers alone. If you simply want to workįor others all your life, you do not need to be accurate or knowledgeable about numbers. People on the right side of the quadrant, in contrast, have become successful by trusting facts. They base their financial lives on opinions such as ‘your house is an asset’ or ‘you need money to make money,’ without ever really looking at the facts. People on the left side of the quadrant tend to blame others for their plight, when the real reason for their situation is lack of knowledge about money. As Kiyosaki says: ‘People who cannot control their cashflow work for those who can.’ Be financially literate The golden rule of personal finance, Kiyosaki notes, is ‘pay yourself first’, but most people continually work to earn money, while others, including their bosses and the government, live off their labours. Their money goes out of their bank account as quickly as it comes in. If you stopped working how long could you survive? Most people, even those with a high salary, work at the financial ‘red line’. Outwardly it makes you look like you are doing well (you have cars and a house and go on holidays), but in fact you live from month to month. The middle-class cashflow pattern is considered normal in our society. All liabilities are paid for as they arise through the cash generated by the assets. Most of the income of the rich, in contrast, comes from assets. This is the cash-flow pattern of the E person. For both the poor and the middle class, most of what they earn comes from a job, and as soon as they receive it the money goes out again for expenses and debts. Kiyosaki identifies the basic cashflow patterns of the poor, the middle class, and the rich. In contrast, a B person will start or buy a system that generates money, and an I will put money into a system that will produce more money without them having to be directly involved. Thanks to this, their operations remain small. Their key words are ‘perfectionism’ and ‘control’ they have to make sure things are done right, which means doing it their way. An S person, on the other hand, will do something to make money on their own. Their key word is ‘security’ and they believe a waged position provides this. Kiyosaki explains the quadrants this way: When an E needs money, they automatically look for a job. The four quadrants are represented by the letters E, S, B, and I. His argument in Cashflow Quadrant is that everyone lives out of one of four financial quadrants, which describe both a mindset and a way of making money. The irony, not lost on him, is that he later became a passionate teacher through his writings and financial seminars. Disliking the idea of becoming a wage-earning teacher himself, he instead pursued a business career. Robert Kiyosaki grew up in Hawaii, where his father was an educator. In the place of logic is fear, including not wanting to know the true state of our spending and income patterns.

The lack of actual knowledge is compounded by psychological issues to do with money: We find it difficult to be logical about something that goes to the very core of our survival.

The result: millions of financially illiterate people, living from pay check to pay check, at the mercy of others who are financially intelligent. Given the huge difference it makes to our lives, it is astounding that we are given little or no education on money matters at school. The mindset and income patterns of the rich are totally different to those of the poor and middle class.

Cashflow quadrant robert kiyosaki