Cashflow Quadrant -
Rich Dad's Guide to Financial Freedom

Cashflow Quadrant is the second book in Robert Kiyosaki's Rich Dad series. In Rich Dad Poor Dad he told us how the rich differ from the poor and the middle class. In Cashflow Quadrant he goes further and explains the different money types of people (the quadrant) and how we can go about becoming a different type if we so wish.

The quadrant specifies where your primary source of income comes from. There is the Employee who works for income; there are the Self-employed who work for himself for income; there is the Businessperson who gets income from his businesses and then there is the Investor whose money works for him and brings him more income. There might be some confusion as to the difference between the Self-employed and a Business person and Robert Kiyosaki states it thus: "...true B's can leave their business for a year or more and return to find their businesses more profitable and running better than when they left it." So the Businessperson develops systems and the Self-employed are the system.

Robert Kiyosaki goes on to explain the seven levels of investors in the world. They are:

• 0: Those with nothing to invest. They spend everything they get or more than they get.
• 1: Borrowers. They borrow from one creditor to pay another.
• 2: Savers. These people put aside money regularly to consume later and they pay cash for everything.
• 3: "Smart" investors. These investors know that they must invest. There is three categories in here: A - I can't be bothered; B - Cynic: They know why investment won't work; C - The Gambler: They "invest" because it is the smart thing to do, but they don't bother with the details and often end up gambling on these investments.
• 4: Long-term investors. They are actively involved in their own investment decisions and are aware of the tax consequences of their investments. They are not big-time investors but know where they are going in the long term.
• 5: Sophisticated investors. These are the people that can afford 'riskier' investments because they have good money habits and a solid financial base. They are clear on their own principles and rules of investments.
• 6: Capitalists. These are the people that use other people's money and other people's time and create their own investments.

So how does one go about climbing the ladder of investment sophistication? Well Robert gives you seven steps that will start you on your journey. These steps are:

1. Mind your own business.
2. Take control of your cash flow.
3. Know the difference between risk and risky.
4. Decide what kind of investor you want to be.
5. Seek mentors.
6. Make disappointment your strength.
7. Keep the faith.

I have met a lot of people who have read only Rich Dad Poor Dad and this prompts me to answer the question: "If I read Rich Dad Poor Dad, do I need to read Cashflow Quadrant?" Whereas RDPD was telling us how the rich is different from the poor and middle-class, Cashflow Quadrant tells you how you can start moving from being poor or middle-class towards becoming rich. So I would say, yes, read Cashflow Quadrant as well.

Money is an emotional subject to most people and I feel I must end this review with a warning. Each and every person is an individual and unique. Cashflow Quadrant helps you to understand where people's money comes from and from which mindset they speak and give advice about money. But we must not cast people into a specific type and that is just where they are. Every person CAN change and this is what Cashflow Quadrant is about: recognizing where you are from and where you want to go.

Cashflow Quadrant links

• Cashflow Quadrant from Amazon