Did you know all forms of income are generated in one of four ways? In Rich Dad Poor Dad: Robert Kiyosaki teaches us about the CASHFLOW Quadrant. We can either earn income as employees, self-employed specialists, business owners, or investors. The majority of us earn our income as employees or self-employed specialists. When I began to look at this fact and evaluate my circumstances I asked myself the question, “Do I want to do and have what the majority of people do and have?”
I cannot encourage you strongly enough to read Rich Dad Poor Dad:. It is one of the most important financial books ever written and has significantly improved the course and direction of our lives. We have previously discussed how most Americans are drowning in debt, work way too many hours, are in poor health, and have failed relationships. That is not where most people intend or desire to wind up yet millions of Americans wind up there any way. The The Principle of the Path teaches “Direction not intention determines destination.” Another way to say that is, “Our choices and actions set us down a path which reveals where we will wind up.”
If most people choose to be employees and self-employed specialists and most people wind up in horrible financial situations should we maybe consider another way of generating income? Most people who look at earning more income either try to get a new, higher paying job or they look to get a 2nd job. Now it is of course nice to have a higher paying job, but it has been my observation that is rarely a long term solution. When we look at almost everyone who has achieved incredible financial success and freedom they have done so as either a business owner or investor.
Starting a business is our best shot at creating significant financial margin for our families. Now being a business owner is not for everyone. It requires a different way of thinking and a different value system than being in the E or S quadrant Kiyosaki teaches us about. It requires personal leadership skills. We must be willing to do things others are unwilling to do. We must have self-discipline since we do not have a boss, BUT the awesome thing is WE DO NOT HAVE A BOSS!
As long as we earn income on the left side of the CASHFLOW Quadrant we are always selling our time. Perhaps the most important reason to transition to the right side of the CASHFLOW Quadrant is we can buy back our time. Building a business the right way can generate income for you even when you are not personally working. That is the key to debt and time freedom. One other great advantage as a business owner is we get to spend pre-taxed dollars as opposed to post-taxed dollars like the left side of the CASHFLOW Quadrant. Lastly as a business owner you get to control your financial destiny instead of a boss or employer deciding if and when you can provide income for your family.
Transitioning from being an employee or self-employed specialist to a true business owner is not an easy transition, but it is worth it. Beth and I were both teachers eight years ago. We read Rich Dad Poor Dad: in the summer of 2008. We began to apply its teachings. We had to learn to think and act in a different manner. We made some drastic changes to our habits and cut out some leisure activities for a time. When I lost my job in March of 2009 I was able to walk away from full-time teaching and retire at the age of 26 because the profits from our business already matched my teaching and coaching salary. We took action on the lessons we learned in Rich Dad Poor Dad: and created a whole new reality for our family.
I would like to ask you to consider the following questions. How many people in your current line of work are debt free and have the financial freedom you want for your family? I would bet not many. Remember for most households even if they have nicer cars and bigger houses that usually just means bigger mortgages and car payments. If so few people in your current profession have time freedom and debt freedom how do you expect to create that for your family by doing the same things they are doing? One of the many valuable lessons I learned in my transition to being and entrepreneur is, “For things to change we have to change.” Do you see the need to begin building a business and transition to the right side of the CASHFLOW Quadrant so you can build more freedom for your family? If so, what are you waiting for? The time is now. In my next post I will share what I have found to be the absolute best path for every day normal people like you and me to build a business without any sort of specialized background or education.
Question: Who are the most financially successful people you know or know of? How do they earn their income? Comment below with their names and what they did to generate their wealth.