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Multiple Income Streams

2010 April 19

In his book, the Cashflow Quadrant: Rich Dad’s Guide to Financial Freedom, author and entrepreneur Robert Kiyosaki talks about 4 types of people:

CashFlow Quadrant

The CashFlow Quadrant, as described by Robert Kiyosaki, in the book of the same name

  • Employees
  • Self Employed
  • Business Owners
  • Investors

Most of us, if we follow the default path in life, of getting a “good education”, then getting a good job, fall into the top left corner, of being nice little employees. We go to school for a good 20 years, then work for 40 years, hoping to have enough money to live for another ten to fifteen years.

Some of us, as consultants, fall into the “S” category – self employed individuals. We too often follow a similar path, with the difference being that at some point we strike out on our own to stray off the path a little bit – hopefully so we can make more money and have more free time.

That’s not often enough though. That’s where the other two types of people come in; you see, those of the left side, typically make up 90-95% of the people, but often control only about 10% of the wealth of society. Those on the right, on the other hand, make up a much smaller portion – 5 to 10% of the population, but they control – you guessed it! – 90% of the wealth. Why is that?Well, in a way, its simple. People on the left side, exchange their time for money. Its not really a scalable formula. You only have so much time in a day, and unless you’re a big CEO, making thousands of dollars an hour, you’ll top out eventually. Even a hard-working professional may top out at a couple of thousand a day. That’s big money, but nowhere in the league of a true “B” or “I” type person, who not only makes more money, but – get this – makes money when they’re not even working!

That’s right. These people make money while sleeping, eating, playing with their kids, and even while on vacation. How do they do it?

I’d definitely read Robert’s book to understand the details, but the key difference is that while on the left, people work for money, essentially trading time for money, people on the right, have their money work for them. That’s a key difference.

The Business owner, by definition, is not the person that’s just operating a business. That’s really someone who is self-employed. The Business owner, is someone that has built a system that operates independently of the owner – it keeps going when he/she is not there in the middle of the action.

The Investor on the other hand, uses money (and leverage) to make more money. He may make thousands, or even tens of thousands (and more!) from a few minutes worth of “work”, while his money continues to work for him!

You’ve seen these people around you. The guy at the coffee shop at 10am in the morning, leisurely reading the paper. The woman in the gym at 3pm, taking her time with her workout. How do they do it?

The key is to harness a system. Without a defined process and plan, for your business or investing, you can’t break free of the bounds of a daily JOB.

More to come in our next column!

MKS

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