Different Ways of Earning Money

Cashflow Quadrant: Rich Dad's Guide to Financial Freedom
by Robert T. Kiyosaki, Sharon L. Lechter C.P.A.

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When people ask why Kim and I were homeless, I tell them it was because of what my rich dad taught me about money. For me, money is important, yet I did not want to spend my life working for it. That is why I did not want a job. If we were going to be responsible citizens, Kim and I wanted to have our money work for us rather than spend our lives physically working for money.

That is why the CASHFLOW Quadrant is important. It distinguishes between the different ways in which money is generated. There are ways of being responsible and creating money, other than physically working for it.

DIFFERENT FATHERS-DIFFERENT IDEAS
ABOUT MONEY

My highly educated dad had a strong belief that the love of money was evil. That to profit excessively meant you were greedy. He felt embarrassed when the newspapers published how much he made, because he felt he was too highly paid when compared with the schoolteachers who worked for him. He was a good, honest, hard working man who did his best to defend his point of view that money was not important to his life.

My highly educated, yet poor, dad constantly said,
"I'm not that interested in money."
"I'll never be rich."
"I can't afford it."
"Investing is risky."
"Money isn't everything."

MONEY SUPPORTS LIFE

My rich dad had a different point of view. He thought it foolish to spend your life working for money and to pretend that money was not important. Rich dad believed that life was more important than money, but money was important for supporting life. He often said, "You only have so many hours in a day and you can only work so hard. So why work hard for money? Learn to have money and people work hard for you, and you can be free to do the things that are important."

To my rich dad, what was important was:
1. Having lots of time to raise his kids.
2. Having money to donate to charities and projects he supported.
3. Bringing jobs and financial stability to the community.
4. Having time and money to take care of his health.
5. Being able to travel the world with his family.

"Those things take money," said rich dad. "That is why money is important to me. Money is important, but I don't want to spend my life working for it."

CHOOSING THE QUADRANTS

One reason my wife and I focused on the "B" and "I" quadrants while we were homeless was because I had more training and education in those quadrants. It was because of my rich dad's guidance that I knew the different financial and professional advantages of each quadrant. For me, the quadrants of the right side, the "B" and "I" quadrants, offered the best opportunity for financial success and financial freedom.

Also, at 37 years old, I had experienced successes and failures in all four quadrants, which allowed me some degree of understanding about my own personal temperament, likes, dislikes, strengths and weaknesses. I knew which quadrants I did best in.

PARENTS ARE TEACHERS

It was my rich dad who often referred to the CASHFLOW Quadrant when I was a young boy. He would explain to me the difference between someone who was successful on the left side vs. the right side. Yet being young, I really did not pay much attention to what he said. I did not understand the difference between an employee's mind-set and a business owner's mind-set. I was just trying to survive in school.

Yet, I did hear his words, and soon his words began to make sense. Having two dynamic and successful father figures around me gave meaning to what each was saying. But it was what they were doing that allowed me to begin to notice the differences between the "E-S" side of the Quadrant and the "B-I" side. At first the differences were subtle, and then they became glaring.

For example, one painful lesson I experienced as a young boy was simply how much time one dad had available to spend with me vs. the other. As the success and prominence of both dads grew, it was obvious that one dad had less and less time to spend with his wife and four children. My real dad was always on the road, at meetings, or dashing off to the airport for more meetings. The more successful he got, the fewer dinners we had together as a family. Weekends, he spent at home in his crowded little office, buried under paperwork.

My rich dad, on the other hand, had more and more free time as his success grew. One of the reasons I learned so much about money, finance, business and life was simply because my rich dad had more and more free time for his children and me.

Another example is that both dads made more and more money as they became successful, but my real dad, the educated one, also got further into debt. So he'd work harder and suddenly find himself in a higher income-tax bracket. His banker and accountant would then tell him to buy a bigger house for the so-called "tax break." My dad would follow the advice and buy a bigger house, and soon he was working harder than ever so he could make more money to pay for the new house... taking him even further away from his family.

My rich dad was different. He made more and more money, but paid less in taxes. He, too, had bankers and accountants, but he was not getting the same advice my highly educated dad was getting.

THE MAIN REASON

Yet, the driving force that would not allow me to stay on the left side of the Quadrant was what happened to my highly educated but poor dad at the peak of his career.

In the early 1970s, I was already out of college and in Pensacola, Florida, going through pilot training for the Marine Corps, on my way to Vietnam. My educated dad was now the Superintendent of Education for the State of Hawaii and a member of the governor's staff. One evening, my dad phoned me in my room on base.

"Son," he said. "I'm going to resign from my job and run for lieutenant governor of the state of Hawaii for the Republican Party."

I gulped and then said, "You're going to run for office against your boss?"

"That's right," he replied.

"Why?" I asked. "Republicans do not have a chance in Hawaii. The Democratic Party and the labor unions are too strong."

"I know, son. I also know that we do not have a prayer of winning. Judge Samuel King will be the candidate for governor, and I will be his running mate."

"Why?" I asked again. "Why run against your boss if you know you're going to lose?"

"Because my conscience won't let me do anything else. The games these politicians are playing disturb me."

"Are you saying they're corrupt?" I asked.

"I don't want to say that," said my real dad. He was an honest and moral man who rarely spoke badly about anyone. He was always a diplomat. Yet, I could tell from his voice that he was angry and upset when he said, "I'll just say that my conscience bothers me when I see what goes on behind the scenes. I could not live with myself if I turned a blind eye and did nothing. My job and paycheck are not as important as my conscience."

After a long silence, I realized that my dad's mind was made up. "Good luck," I said quietly. "I'm proud of you for your courage, and I'm proud to be your son."

My dad and the Republican ticket were crushed, as expected. The re-elected governor sent the word out that my dad was never to get a job again with the government for the state of Hawaii... and he never did. At the age of 54, my dad went looking for a job, and I was on my way to Vietnam.

At middle age my dad was looking for a new job. He went from jobs with big titles and low pay to more jobs with big titles and low pay. Jobs where he was the executive director of XYZ Services, a nonprofit organization, or managing director of ABC Services, another nonprofit.

He was a tall, brilliant and dynamic man who was no longer welcome in the only world he knew, the world of government employees. He tried starting several small businesses. He was a consultant for a while, and even bought a famous franchise, but they all failed. As he grew older, and his strength slipped away, so did his drive to start over again; his lack of will became even more pronounced after each business failure. He was a successful "E" trying to survive as an "S," a quadrant in which he had no training or experience and for which he had no heart. He loved the world of public education, but he could not find a way to get back in. The ban on his employment in the state government was silently in place. In some circles, the word is called "blacklisted."

If not for Social Security and Medicare, the last years of his life would have been a complete disaster. He died frustrated and a little angry, yet he died with a clear conscience.

So what kept me going in the darkest of hours? It was the haunting memory of my educated dad sitting at home, waiting for the phone to ring, trying to succeed in the world of business, a world he knew nothing about.

That, and the joyous memory of seeing my rich dad grow happier and more successful as his years went on inspired me. Instead of declining at age 54, rich dad blossomed. He had become rich years before that, but now he was becoming mega-rich. He was constantly in the newspapers as the man who was buying up Waikiki and Maui. His years of methodically building businesses and investing was paying off, and he was on his way to becoming one of the richest men in the Islands.

SMALL DIFFERENCES BECOME
LARGE DIFFERENCES

Because my rich dad had explained the Quadrant to me, I was better able to see the small differences that grew into large differences when measured over the years a person spends working. Because of the Quadrant, I knew it was better to decide not so much what I wanted to do, but more who I wanted to become as my working years progressed. In the darkest hours, it was this deep knowledge, and lessons from two powerful dads, that kept me going.

IT IS MORE THAN THE QUADRANT

The CASHFLOW Quadrant is more than two lines and some letters.

If you look below the surface of this simple diagram, you will find completely different worlds as well as different ways of looking at the world. As a person who has looked at the world from both the left side of the Quadrant and the right side, I can honestly say the world looks much different depending on which side you are on... and those differences are what this book is about.

One quadrant is not better than another... each has strengths, and each has weaknesses. This book is written to allow you to glimpse into the different quadrants, and into the personal development required to be financially successful in each of them. It is my hope that you will gain further insights into choosing the financial life path that is best suited for you.

Many of the skills essential to be successful on the right side of the Quadrant are not taught in school, which might explain why people like Bill Gates of Microsoft, and Ted Turner of CNN, and Thomas Edison left school early. This book will identify the skills, as well as the personal core temperament, that are necessary to find success on the "B" and "I" side of the Quadrant.

First, I offer a broad overview of the four quadrants and then a closer focus on the "B" and "I" side. There are already plenty of books written about what it takes to be successful on the "E" and "S" side.

After reading this book, some of you might want to make a change in how you earn your income, and some of you will be happy to stay just where you are. You might choose to operate in more than one quadrant, and maybe in all four quadrants. We are all different, and one quadrant is not more important or better than another. In every village, town, city and nation in the world, there is a need for people operating in all four quadrants to ensure the financial stability of the community.

Also, as we grow older and gain different experiences, our interests change. For example, I notice that many young people right out of school are often happy to get a job. Yet, after a couple of years, a few of them decide they are not interested in climbing the corporate ladder, or they lose interest in the field of business they are in. These changes of age and experience often cause a person to search for new avenues of growth, challenge, financial reward and personal happiness. I hope this book offers some fresh ideas for attaining those goals.

© 1998, 1999 by Robert T. Kiyosaki and Sharon L. Lechter

About the Author

Robert Kiyosaki a financier, author and teacher says "that the main reason people struggle financially is because they have spent years in school but learned nothing about money. The result is that people learn to work for money... but never learn to have money work for them."

Co-author of the Rich Dad series of books and CEO of the Rich Dad Organization, Sharon Lechter has dedicated her professional efforts tot he field of education. She graduated with honors from Florida State University with a degree in accounting, then joined the ranks of Coopers & Lybrand, a Big Eight accounting firm. Sharon held various management positions with computer, insurance, and publishing companies while maintaining her professional credentials as a CPA.