One of the key concepts in "Rich Dad Poor Dad," is the Cash Flow Quadrant. The quadrant outlines the different types of positions that people hold in society. The types of people in the quadrant are outlined as follows:

Employee, Self Employed,  Business Owner,  Investor

The way many people view the quadrant is to look at what position they want to hold, and only focus on that position. The more useful way to view the quadrant is to see it as a roadmap to your life and career development.

The Employee Quadrant

When you are first starting out and don’t have any money or experience, you need to trade time for money. Eventually you will want to switch this arrangement and use money to get more of your time back. 

You will need to work for someone else and help build their dreams initially and this should be at a job that you enjoy doing. Additionally, you also you want to work somewhere where you can learn about the business that you want to own. This job will serve a dual purpose by giving you necessary income, but also giving you skills you will need in the future. Lastly you want to work at a job that gives you enough time to work for yourself on the weekends and or in the evenings. This will set you up for the next part of the cash flow quadrant.

Before we talk about the next quadrant we need to say a quick word about the Investor Quadrant. The investor quadrant is an essential part of the other 3, because at each level you should be investing. We will talk investing and the long term ways to grow your money at the end.

Be sure to stick around for this important quadrant.

The Self- Employed Quadrant

This is where you start your side-hustle and start investing in yourself. Find something you are passionate about and something that fits your goals personally and professionally. Ideally you should find something that you already have some basic skills in. This will shorten the amount of time you will need to learn how to do other aspects of your side hustle. You also want to take notes on what you learned at each step of the business-building process, so you can provide instruction to your future employees.

Being self-employed teaches you many things about business and it also provides additional income that you can use to invest in your next level of expansion. An important step that you need to take in this quadrant is beginning to outsource certain tasks that take precious time away from you performing the parts of your business, that bring in the income. Things like tax preparation, graphics, website maintenance and social media can be outsourced via online platforms like Fiverr and Upwork. This will improve your productivity and give you the time and space to make the larger directional decisions for your business.

The Business Owner Quadrant

This brings us to quadrant 3 where you now have employees doing the work that you used to do, freeing you up to find other opportunities. As a business owner you are working at scaling your business more so than the day-to-day operations. This is where your experiences as an employee come in handy because you are able to guide your employees in and out of issues and you are able to find ways of streamlining the processes in your business.

As a business owner, you quickly understand the crucial importance of seizing opportunities to expand and grow your business, as well as the various ways in which broader external influences can both positively and negatively impact your business's operations. Being aware of these factors helps you to better plan for the future and make smart decisions that will help your business succeed.

Another bonus of being a business owner is having a bird’s eye view of what a good business looks like and does not look like. This gives you an invaluable advantage for the next quadrant, where you will be evaluating businesses to invest in.

This brings us to our last quadrant and the most important one to achieving the financial freedom that Kiyosaki talks about. The Investor Quadrant.

The Investor Quadrant

There are two types of investing that we need to consider: personal investing and business investing.

Personal Investing

Most people think of investors as people who have a lot of money to buy companies. What many don’t understand is that whenever you buy stock you have ownership in that company and are therefore considered an investor. You should start early with personal investing because you want the power of compounding to be on your side. 

The most common form of investing is Dollar Cost Averaging. This is where you put a specific amount of money into an account, usually a retirement account, on a monthly basis and purchase securities in a balanced portfolio, that will give your account enough risk, stability and growth, to provide you with monthly income during your retirement. By making the same investment every month, you are averaging the cost of each security and effectively reducing your overall cost.

The more consistent your investing, the larger your account will grow. This is a long term activity and you should be looking towards your retirement age as the goal, to start using the money in your stock portfolio. 

Business Investing

When you reach a certain level as a business owner and you no longer are required on the day to day operations of the business, you can create a holding company and use profits from the 1st business to buy other businesses. This is where your money really starts to grow. Think of it as compounding your assets, just as your money compounds with interest, your assets compound when you buy other businesses that add to your existing business. 

The companies you want to buy in your holding company should compliment the company you already own. Ideally you want to buy companies that have products or services that you use so you can reduce the costs of your initial business. This will increase your profit margins and enable you to buy other businesses more quickly. 

Some companies you don’t have to own outright. You can buy a large enough amount of shares to be able to negotiate with the owners for reduced fees for their services. 

Using the Cash Flow Quadrant as a roadmap to your career, can really help guide your personal and business money decisions. It’s important to appreciate each level of the process and learn as much as you can when you are in each of them. They compliment each other and knowledge of one enhances the experience of another.

To purchase Robert Kiyosaki’s book “Rich Dad, Poor Dad” you can buy it here: “Rich Dad, Poor Dad” Book

You can also play the Cash Flow Game online for free at: CASHFLOW Game Online

And if you would like a physical version of the board game you can purchase that here: CASHFLOW Board Game