Finance

The Four Quadrants

About ten years ago, I came across a book “Cashflow Quadrant: Rich Dad’s Guide to Financial Freedom” by Robert Kiyosaki. Those who are interested in finance and investment, most likely have come across the author’s work at some point in time.

Mr Kiyosaki has written a good number of books, but this particular one stands out. Basically it describes which financial path we are on at a given time in our life. The book was basically a sequel to his previous book “Rick Dad Poor Dad”.

The four quadrants are (E)mployee, (S)elf-employed, (B)usiness owner, and (I)nvestor.

(E)mployee

This is where the majority of people spend most of their working life in.
E is also where Mr Kiyosaki’s ‘Poor Dad’ is. In this quadrant, one is basically set to work for someone else. One would go to school/college/university to get educated, then use whatever one has learnt for the benefit of the employer.
The crave for certainty and security is the main reason for them to remain in this quadrant.

(S)elf-employed

This group of people are somewhat opposite to the E group, in that security and certainty are not the main concern. Instead, they start thinking outside the box and take things into their own hands.
The S group could be on to something bigger, since they are no longer restrained by the worry of security, or self-limiting emotions. In terms of success, the sky is the limit, you may say. But not really. Why?
Explanation to follow in the next quadrant.

 

(B)usiness

Now that a self-employed person is taking control of his/her destiny, success is pretty much self-determined. So it should be only limited by the imagination, right?
In theory, yes. But in reality, it’s a little complicated.
A person only has 24 hours a day. As much as one can work, there is only so much one can accomplish in a day.

So in order to break free from these constraints, we need delegation and teamwork, which are the ‘success-multiplier’. Business can be viewed as a collection of systems representing an idea or vision, in which its core functions and competencies are delegated, where a team of people work to grow the business, and the founder of the business may not be needed to sustain the business.

 

 

(I)nvestor

This quadrant is a transformation quadrant in that money earned from the other quadrants are converted into wealth. Ultimately, Mr Kiyosaki said, anyone who wishes to be rich needs to move into this quadrant to get the money snowball rolling. It is in this quadrant that the sweat and blood of those who worked continue to work for them. The sweat and blood are the assets that generate return 24/7.

 

From One Quadrant To Another

People have different experiences in their life, different expectations, different outlook in life and so on. So most will start out in one quadrant and move to different quadrants throughout their life. Some will remain in one quadrant for life, while others will be in more than one quadrant.
To achieve lasting financial freedom, it would be hard not to end up in the ‘I’ quadrant whether partially or completely.
In my case, I am firmly in the ‘E’ quadrant, and I am also in the ‘I’ quadrant since, I have investments in financial assets (pension, registered accounts).
I am always looking for a side hustle to boost income, i.e. looking to step into the ‘E quadrant as well.
What about you readers? What situation are you in? Are you more in one quadrant than another?