Cashflow Quadrant

I spent the weekend reading through Robert Kiyosaki's Cashflow Quadrant. It was an awesome read, and very captivating, and there was no difficulty coming back over and over again to continue reading until I've completed it cover to cover.

I was inspired to read this book from millennial-revolution, who "LOVED" this book.

In the book, Robert identifies that there are 4 groups of people, namely, the E (Employee), S (Self-employed, B (Big business) and I (Investor), with E and S on the left side of the quadrant and B and I on the right side. These groups of people derive their income from different sources, with E and S working hard with their own effort and time to mind other people's business, while B creates the business and I uses money to grow money. The author also goes on to illustrate the different characteristics of the people in the different groups.

The book strongly emphasizes the different approach the groups have towards security and risk. In particular, the E and S groups prioritize security highly, while the B and I groups prioritize freedom and risk-management. The author also notes that the government treats both groups very differently, with oppressive tax regimes for the left quadrant and numerous tax breaks and exemptions for the right.

The author also advocates financial literacy, encouraging people who wish to transit from the E and S groups to the B and I groups to educate and change themselves, in the process of BE-DO-HAVE. Finally, he gives a short course on the baby steps one can take to make the move from the left to the right, including knowing oneself better, managing own cashflow, seeking good mentors, mastering disappointment and keeping the faith.

In this book, Robert Kiyosaki showcases his ability to present his ideas in a manner which is simple for his audience to follow. These ideas are then developed into more complex concepts, and illustrations are provided to present these concepts graphically.

One part of the book that stuck greatly with me was how differently we're treated by the government. The book shows that the cashflow for the left group goes as follows: Income -> Taxes (Income tax) -> Spend, while the cashflow for the right group goes as follows: Income -> Spend -> Tax. This struck me particularly because I've understood EBITDA in income statement for a period now, but the significance of how tax is calculated after spending in a business versus how we are taxed on our incomes as employees did not occur to me until I've read this book.

It was an inspiring book, and I hope to continue my reading journey as I seek to further educate and improve myself. I do encourage those of you who have yet to read this book to consider picking this up (perhaps in the library?), as it is an easy read and there may be good ideas that you may want to pick up and use.