Kiyosaki's Cashflow Quadrant - Which Quadrant are you?

[.toe]

I'm Mostly E but also I. But I actually wanted to mention that I've been watching Kiyosaki's seminar videos at richdadworld.com (he charges a small fee). He is such a comedian in real life, hilarious.

He's this politically incorrect former marine, gun slinger who calls a spade a spade. He talks about kill or be killed, & is fond of responding to peoples concerns about the finance world with one quote, "I don't give a $hit!". He's an athiest yet he's surrounded by all these mormon advisors (lawyers, accountants etc), who's philosophy is only slightly different because they "don't give a care!".

In the videos Kiyosaki's philosophy is much more than just which quadrant you're in. It's more like this Our economy is going to hell, the government is going to make sure it happens, they're going to cause more inflation & tax us all to death & give the money to the rich who are also busy stealing from us via our debt loads. BUT what's most important is "I don't give a schyt" because if I'm smart I can beat them at their own game, whether the economy crashes or booms, or the market goes up or down.

 

[RedCat]

Most income comes from my small business. We've started a second business that although also small, is a lot more passive and we're moving income into investments when we can.

 

[recruit2]

- Employee (doh!!!). But very healthy package always makes it hard to walk away from and even harder to replace with a small biz. Small biz is tough!
- PPoR with heaps of equity is my ONLY investment, apart from my super.
- Also built and run a side business which is progressively growing, albeit slowly, but kind of doubles as an asset that could be sold one day.

- No other shares or IPs.

Would like to:
- Gradually grow the side business until it thrives to the point where I can walk away from my main employment OR sell the side business for a healthy lump sum. Already tried to once and lasted for about 2 years, but the business wasn't up on its feet sufficiently to keep me going, so I walked back into a high paying job now and the plan is to get the business fully pumping within 3 years, then take the leap again. Or to just stay in the job and allow the business to supplement things on the side.

 

[tess85]

- Employee (doh!!!). But very healthy package always makes it hard to walk away from and even harder to replace with a small biz. Small biz is tough!

Same here... employee, but having a relatively decent salary makes it super hard to walk away from to start up a business (which frankly, I don't know anything about and don't think is my kind of thing....)

Hubby has a side business which is growing but I can't think of ANYTHING at all if I am going to start a business... am I just not thinking hard enough?

 

[jaycee]

Same here... employee, but having a relatively decent salary makes it super hard to walk away from to start up a business (which frankly, I don't know anything about and don't think is my kind of thing....)

Hubby has a side business which is growing but I can't think of ANYTHING at all if I am going to start a business... am I just not thinking hard enough?

Do you want to start a business ?

 

[tess85]

Hmm, not really, but Kiyosaki seems to bag out being an employee sometimes. Maybe eventually I would like to have my own business. Oh well I am happy to be a salaried employee for the next little while and just rely on investments for wealth generation. I work in a consultancy where our charge out rate is $220 per hr so I guess if I wanted to start a business, that would be the natural step to take - starting my own consultancy... big step though! Better get the work experience to back it up first

 

[pennyk]

Hmm, not really, but Kiyosaki seems to bag out being an employee sometimes. Maybe eventually I would like to have my own business. Oh well I am happy to be a salaried employee for the next little while and just rely on investments for wealth generation. I work in a consultancy where our charge out rate is $220 per hr so I guess if I wanted to start a business, that would be the natural step to take - starting my own consultancy... big step though! Better get the work experience to back it up first

I have already said this on this thread, but I think starting a small business is very overrated, and being a well paid employee is underrated.
the majority of business owners lose money, and its much harder to obtain finance for investing.
So, if you are well paid, enjoy your job and dont have a "business mind", stick to what you do well, and make the most of it to invest in other areas.

 

[recruit2]

I have already said this on this thread, but I think starting a small business is very overrated, and being a well paid employee is underrated.
the majority of business owners lose money, and its much harder to obtain finance for investing.
So, if you are well paid, enjoy your job and dont have a "business mind", stick to what you do well, and make the most of it to invest in other areas.

Totally agree. I met with a lot of small business owners during the past year and in *most* cases, boy do they have it tough!

I couldn't even go close to replacing a 200k salary package with a small business. Plus in many small businesses you often need to borrow money to even get into it in the first place, so you may well have a loan/risk associated with it too. I have my stresses and challenges at work, but hey I go home at 5-6pm and get on with my life most of the time... My side business is more out of passion more than anything and it makes peanuts, but hey I love doing it.

I've dabbled in business 3 times and more and more I'm just coming back 100% full swing to my well paid job as the smartest solution from here on. Plus I get plenty of public holidays, 2 weeks shutdown over Christmas and 4 weeks paid leave on top of that.

I found that business was really a lot tougher than what most people let on and I ended up coming back to my corporate career again with a renewed energy.

 

[MIW]

I have already said this on this thread, but I think starting a small business is very overrated, and being a well paid employee is underrated.
the majority of business owners lose money, and its much harder to obtain finance for investing.
So, if you are well paid, enjoy your job and dont have a "business mind", stick to what you do well, and make the most of it to invest in other areas.

Yes, small business is just being self-employed, so it's very hard but building a true business like RK, where income is generated even without you being there is something else.
I understand that is is very hard to succeed and that's why only few do.
I will give you an example, our dear friend, in mining industry was an employee, then became a consultant then a small business owner (was self-employed) and now owns a private company worth market capitalisation of about $80 million, no debts, makes profit, about to float perhaps this year.
I have read an article in DEC 2011 about the company's IPO that may reach about $800mill - $1 billion.
Please do not misunderstand, I am not boasting about it, but I can see it's possible, as our friend will be perhaps a billionaire.
I think that's what RK talks about, remember he failed too with his velcro wallets and tried again.
I sometimes wonder what makes my friend different that he succeeded to do it from scratch (self-made) and I can conclude the following:
1. Had a passionate goal/vision (always wanted a mine worth at least $300mill)
2. Positive mindset no matter what obstacles he faced (and belive me, he faces them everyday)
3. Always learned on past mistakes
4. An honest, reliable an trustworthy man
5. Was able to build a great team around him to pursue the same goal/vision
6. Never ever, ever, ever gave up upon his goal/vision.
I don't think there are many people like that so that's why so many of us do not succeed but remember you only fail when you give up...
As for our poll:
Were employees Q1, still are small business owners (self-employed) Q2, and now have investment income too Q4.
So the main cashflow is now from Q4 and then from Q2 (thanks to RK too!)
Also by investments I don't only mean rentals.... I am a true believer of multiple sources of income so I strive for that.

 

[.toe]

I think many people might be confused about what RK is saying on the subject of small business. I listened to an mp3 where he said he felt small business was perhaps the hardest way to make money. He talk about four quadrants E,S,B,I. Where S is small business & it is not what RK is advocating, instead he suggests people move towards B & I or a big business mentality & investing.

In any case RDPD was a long time ago. If you fast forward to what he's saying on his websites & recent books you will see that it's all about protection. He believes that the world is about to fall into a huge financial black hole with the U.S. in the lead. One of his frequent quotes is that 'the middle class are going to be wiped out'. Actually he's been saying this since the '90s but now he's saying it's here.

From Conspiracy Of The Rich website (create a login to view).

"Can the crisis be solved?

It’s possible this crisis can be solved, but not likely. Our leaders are too weak and too chicken to do what must be done. Their lack of guts will only cause the problem to grow bigger. Besides, many of our leaders get richer off the misery of others.

I’m not counting on my leaders. I don’t think it matters who becomes the next President. I think it’s time to start saving yourself and your family.

So the good news is that in a few years there will be lots of money thanks to the cash pumped into our system by the central banks.

The bad news is that prices and taxes will be much higher—if we’re lucky.

If we’re not lucky, and inflation does not solve the problem, then we’re heading for what my friend Richard Duncan calls, The New Depression, the title of his book due out next year. "

 

[MIW]

I think many people might be confused about what RK is saying on the subject of small business. I listened to an mp3 where he said he felt small business was perhaps the hardest way to make money. He talk about four quadrants E,S,B,I. Where S is small business & it is not what RK is advocating, instead he suggests people move towards B & I or a big business mentality & investing.

In any case RDPD was a long time ago. If you fast forward to what he's saying on his websites & recent books you will see that it's all about protection. He believes that the world is about to fall into a huge financial black hole with the U.S. in the lead. One of his frequent quotes is that 'the middle class are going to be wiped out'. Actually he's been saying this since the '90s but now he's saying it's here.

Yes I agree, and I did read this book too so I have diversified and bought some gold and silver too, as well as I have done other things....
He's a great educator.

 

[pennyk]

Yes, small business is just being self-employed, so it's very hard but building a true business like RK, where income is generated even without you being there is something else.
I understand that is is very hard to succeed and that's why only few do.
I will give you an example, our dear friend, in mining industry was an employee, then became a consultant then a small business owner (was self-employed) and now owns a private company worth market capitalisation of about $80 million, no debts, makes profit, about to float perhaps this year.
I have read an article in DEC 2011 about the company's IPO that may reach about $800mill - $1 billion.
Please do not misunderstand, I am not boasting about it, but I can see it's possible, as our friend will be perhaps a billionaire.
I think that's what RK talks about, remember he failed too with his velcro wallets and tried again.
I sometimes wonder what makes my friend different that he succeeded to do it from scratch (self-made) and I can conclude the following:
1. Had a passionate goal/vision (always wanted a mine worth at least $300mill)
2. Positive mindset no matter what obstacles he faced (and belive me, he faces them everyday)
3. Always learned on past mistakes
4. An honest, reliable an trustworthy man
5. Was able to build a great team around him to pursue the same goal/vision
6. Never ever, ever, ever gave up upon his goal/vision.
I don't think there are many people like that so that's why so many of us do not succeed but remember you only fail when you give up...
As for our poll:
Were employees Q1, still are small business owners (self-employed) Q2, and now have investment income too Q4.
So the main cashflow is now from Q4 and then from Q2 (thanks to RK too!)
Also by investments I don't only mean rentals.... I am a true believer of multiple sources of income so I strive for that.

I'm glad for your friend, but I can equally tell 10 stories of people I know who have all the same attributes, who have failed in business and lot alot of money along the way. In fact, I think some of the enthusiasm and visionary nature of entrepreneurs is exactly what is their undoing. They dont see the signs of downturns in the market, and refuse to accept when things arent going well.
The people who I know who have been most successful in business are pragmatic and not so idealistic.

 

[Rolf Latham]

I'm glad for your friend, but I can equally tell 10 stories of people I know who have all the same attributes, who have failed in business and lot alot of money along the way. In fact, I think some of the enthusiasm and visionary nature of entrepreneurs is exactly what is their undoing. They dont see the signs of downturns in the market, and refuse to accept when things arent going well.
The people who I know who have been most successful in business are pragmatic and not so idealistic.

Well............I have a few more than 10 failure stories of clientsunder my belt, I can also provide lots of success stories.

We cant all be employees, especially in OZ, where a lot of the jobs come from SME.

We think we know who or what would make a succesful business.........

My experience is this........

People will do all sorts of dd on a business or franchise they are about to buy, send the figures to the accountant, see if they can raise the cash, they may even do some basic SWOT analysis and see that " no effective competition" isnt a great selling point, its a major weakness.

The one bit that we fail miserably to do the DD work on is US

Are we willing to do what it takes to make this thing work, and do we know what that work actually is ?

I have become know as Dr NO in our practice, because most businesses that come across our table for funding just dont cut it, and the price earnings multiple is a JOKE !

Having said that, I have dozens of clients who have made the transition from PAYG to Self employed / business and have done exceedingly well.

My suggestion ?......................seek advice from those that have been successful at what you are trying to do and dont spend too much time with those that havent made the transition. DOnt totally discard the negative input, but give it the focus it deserves


ta
rolf

 

[Aaron_C]

In the USA there is a government initiative that provides loans to small business start-ups. They don't take a security. Here, however, you have to have security (via property) to get funds for business - and banks only lend on business goodwill if it's a IGA supermarket, pharmacy etc.

I do agree with rolf that lots of people get overexcited with small business franchises (myself included). Once you factor in wages and rent you just want to throw up though - the guts ache isn't worth it.

 

[Deltaberry]

Franchises are a tough business. High buy in costs, and no guarantee. You might as well just copy the relevant idea and try to roll it out. If the idea is too hard to copy, the buy in costs will be HIGH so you're in a tough spot either way.

Funniest thing I always read in magazines is all these people who go out to buy a franchise, and then have to work in the business day in day out. Might as well get a job which doesn't require capital outlay. Was reading this about some guy who opened a New Zealand icecream shop the other day. Spent some $150k. Now he makes $60k a year. And he works from 7am to 9pm almost every day.

Problem is most new business operators - like the person in question above - don't get it because they always disregard the time they spend and ignore the opportunity cost of their salary. Even worse are the ones that get their whole family in to it.

Imagine this.

Open a chicken shop. Get husband and wife and son and daughter working day in day out to earn say $80k. Husband and wife could be out there earning $100k and son and daughter could be at home sleeping. No stress.

 

[willair]

In my case, I get my cashflow through Employment, a small amount in a small business, and I move it into five investment properties in the investment quadrant. Slowly, my investment quadrant is growing, though Im guessing Kiyosaki wouldnt class my IPs as true investments, since at the moment they are CF neg.

My husband and I currently have an opportunity to get involved in the Business quadrant too.

Im curious to know where other people sit on the quadrant? You can give more than one answer to this poll.

Lou.

Try and have a read of some of this Mans books they are priceless,before the ink is dry on the oneway contract,and you wake up holding the can..

http://www.e-myth.com/

 

[investor2009]

I cannot vote due to being spread over two-three sections of the quadrant

 

[recruit2]

Problem is most new business operators - like the person in question above - don't get it because they always disregard the time they spend and ignore the opportunity cost of their salary. Even worse are the ones that get their whole family in to it.

Imagine this.

Open a chicken shop. Get husband and wife and son and daughter working day in day out to earn say $80k. Husband and wife could be out there earning $100k and son and daughter could be at home sleeping. No stress.

TOTALLY agree Delta.

Young kids take note: Get an education instead and turn up 9am-5pm in a high paying job and enjoy your weekends and invest the cash flow into good investments. Forget small business! It's a slog.

 

[Theresa777]

Half and half: (2&4) moving into fully (4) within a few years, but that's only if nothing drastic happens, like property values dropping by 30%.

P.S. I absolutely love Robert Kiyosaki. His first book should be compulsory reading in all schools. But it won't be, will it, because it reminds all the 9-to-5 academics that they are the Poor Dads. Well, hardy har har.

 

[matto_]

My reading of the S quadrant is a little different to what is being discussed.

Direct from that good ole source - Wiki:

E: Employee — Working for someone else.
S: Self-employed or Small business owner — Where a person owns his own job and is his own boss.
B: Business owner — A person who owns a business to make money; typically where the owner's physical presence is not required.
I: Investor — Investing money in order to receive a larger income in the future.

In his books - the main focus of the S quadrant is more on Lawyers, doctors etc - hence self employed.

I also didn't read that people should - progress through each of the quadrants.

My reading was more that people should move as quick as possible to either the B or I quadrants with a preference for the I quadrant.

AGAIN - Direct from that good ole source - Wiki:
For those on the left side of the divide (E and S), Kiyosaki says that they may never obtain true wealth. Conversely, those on the right side of the divide (B and I) are supposedly following the only road to true wealth.

As for an answer of the question:
Mainly derive my income from E quadrant - however moving towards the I quadrant (but not quick enough).